Dhruvi Singh Raghuwanshi | May 2022
COVID-19 has had a differentiated impact across nations. On a deeper analysis, it is evident that one of the biggest victims of the financial impact of the pandemic were developing nations, primarily those that were already in the process of recovering from various financial losses. Emerging Market and Developing Economies (EMDEs) are the economies that have the disadvantage of more poverty, inadequate healthcare, and insufficient resources and advancements to shift the work culture entirely remotely. In contrast, Advanced Economies, such as the United States, are more industrialized and equipped to bear the losses that might come with a nationwide shutdown. EMDEs are increasingly buffeted by boom-and-bust commodity cycles, the causes of which are often beyond their control [1].
COVID-19 perfectly blended with existing record debt levels, elevated income inequalities, and rising inflation to create disastrous circumstances for the economy and growth of many nations. The impacts of the pandemic tangled with the specific issues of EMDEs added to the immediate fall in their GDP. India, for example, was just on the edge of recovery from demonetization, an initiative taken by the government in November 2016 with the hopes of curbing corruption. The act was passed to ban the currency of the denominations ₹500 and ₹1000 overnight, which accounted for 86% of the country’s currency in circulation. Adding to the limited recovery from the demonetization was the sudden nationwide shutdown as a consequence of the COVID-19 pandemic. India, as a result, witnessed a steep increase in its exchange rate from 65.1 in 2017 to 70.40 in 2020 to 74.46 in 2022.
Dealing with the aftershocks is as challenging as dealing with the pandemic. The Global Economic Prospects report predicts that among EMDEs, growth is expected to drop from 6.3 percent in 2021 to 4.6 percent in 2022 and 4.4 percent in 2023 [1]. A notable observation was the difference in the way EMDEs dealt with the COVID-19 healthcare and relief crisis. Countries that had a proper healthcare system, which also ensured the strict implementation of lockdown policies, and proper distribution of the relief funds were able to deal with the downfalls accompanying the pandemic relatively easier. Vietnam is a stellar example of such a country. It is one of the very few economies in the world to have positive economic growth in 2020 [2]. While a smaller population also contributes to the difference in the outcome, the swift and strong recovery of the nation is mostly backed by a highly successful public health response.
The pandemic no doubt casts a long shadow on the economic growth of both developed and developing nations. The question we should be focussing on is how the governments and economists can be prepared for catastrophic events such as the pandemic in the future. As evidence suggests, the start should be through investment in the healthcare system, technology, and implementation of proper policies to avoid the misuse of the crisis relief funds of the nation.
References:
[1] “As Global Growth Slows, Developing Economies Face Risk of ‘Hard Landing.’” World Bank Group, 11 January 2022, As Global Growth Slows, Developing Economies Face Risk of ‘Hard Landing’. Accessed 12 May 2022.
[2] Stromseth, Jonathan, et al. “Southeast Asia’s post-pandemic recovery outlook.” Brookings, 15 March 2021, Southeast Asia’s post-pandemic recovery outlook. Accessed 14 May 2022.
[3] “World Bank. 2022. Global Economic Prospects, January 2022. Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/36519 License: CC BY 3.0 IGO.”