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The Affect of Covid-19 on Emerging Market Economies

This essay responds to the article written on 24th September 2020 by Deloitte Insights article concerning the subject of The Affect of the Covid-19 pandemic in the emerging markets as a whole. It is evident that most emerging markets and developing economies have so far weathered the Covid-19 pandemic well than projected, but all the same, they face daunting long-run economic challenges. The emerging market economies are going through many challenges, a lot of which are past their control (Ahmed et al., 2020). The economic costs and health of the crisis have been severe in many nations. Even for nations that have evaded the nastiest pandemics domestically, trades have debilitated as a result of the fall in global demand. 

Most emerging markets are having difficulty in a way that they struggle to stimulate their economies. Central banks and governments have been inevitably wary when offering monetary and fiscal stimulus to avert fiscal disruptions (Ahmed et al., 2020). Despite relatively low fiscal stimulus, most emerging markets face much higher debt burdens due to the loss of revenue, which is adding to risks. As the crisis struck and the lockdown preventive measure was put in place, economic activities came to a stop. In particular nations, the fall in actual GDP was severe. India lost more than 25%, while the Colombia, Philippines, Morocco, Mexico, and Malaysia each lost more than 15% economically. On the other hand, Peru lost more than 30% of its productivity between Q4 2019 and Q2 2020. The economic impacts of the crisis on emerging markets economies far exceed that of the international financial crisis. Developing countries and emerging markets have approximately $3.9 trillion in debt service and around $11 trillion in external debt due in 2020. Debt impends to generate a universal growth emergency similarly that the crisis is causing a universal wellbeing emergency.

Reference

Ahmed, S., Hoek, J., Kamin, S. B., Smith, B., & Yoldas, E. (2020). The Impact of COVID-19 on Emerging Markets Economies’ Financial Conditions. FEDS Notes, (2020-10), 07-1.