When capital flows run, the countries listed as emerging markets will suffer the most severe economic shock because of Covid-19.
In New Delhi, India, 45-year-old Shagun sits on the side of the road cutting bananas, cucumbers and papayas for sale to passenger tricycle drivers. Because the sales were halved, her family’s meals included only the cheapest rice and lentils. She also added water to the milk for her children.
“My husband is unemployed. I have no money to save. We cannot leave this street stall, we are struggling with just one meal a day,” she said.
In Buenos Aires, taxi driver Alejandro Anibal Alonso, 53, lazily walked slowly on deserted streets looking for customers with fear that he might be infected with nCoV. But the fear of losing the car as a mortgage for the bank is bigger.
Two years ago, he borrowed money to buy a taxi. Interest rates vary with inflation. When Argentina was deep in crisis, the amount of money he needed to pay each month increased from 7,800 pesos (more than 122 USD) to 25,000 pesos (nearly 393 USD).
Having enough money to pay monthly interest was a desperate challenge for Alonso. He was late in February payments and currently has no payment for March. Last week, creditors sent Alonso a threatening email: “The payment cannot be stopped because of nCoV”.
“I don’t know what to do anymore,” he said. “The current problem is beyond my ability to cope.” He suppressed his fear of viruses, accepting to the airport to welcome guests. “I cannot refuse any vehicle,” Alonso said.
When the Covid-19 pandemic brought a global economy to a standstill, the world’s most vulnerable countries were severely damaged. Businesses have to lay off employees because of falling sales. Households have to save money because of falling incomes. International investment is moving away from emerging markets at an unprecedented pace from the 2008 financial crisis, reducing the value of money and making people pay more for real imported goods. product or fuel.
“The current situation will be even worse, even worse than the 2008 global financial crisis for emerging markets,” said Per Hammarlund, strategist at SEB Group, a global investment bank. based in Stockholm, Sweden, said. “Really cruel”.
Covid-19 also posed a threat to global prosperity. Emerging markets account for 60% of the world economy on the basis of purchasing power, according to the International Monetary Fund (IMF). Deceleration in developing countries will lead to a global slowdown.
From South Asia to Africa and Latin America, Covid-19 presents challenges to developing countries both health and economic. This situation also occurs in rich countries, but in poor countries, where billions of people have to run every meal, the risk is even greater.
Many governments are burdened by large debts, limiting their ability to help those in need. Since 2007, public and private debt in emerging markets has increased from 70% of annual economic output to 165%, according to Oxford Economics.
The pandemic also pushed international investment away from emerging markets and towards safer “hiding places” like US government bonds.
Last year, more than 20 emerging markets, including China, India, South Africa and Brazil, received investment flows of about US $ 79 billion, according to the International Finance Institute (IIF). But in the past two months, about $ 70 billion of net investment has left these countries.
That change raises concerns that some countries may be insolvent and insolvent, especially Argentina, Turkey and South Africa.
“The speed is amazing,” said Sergi Lanau, an economist at IIF. “All vulnerable countries will face a really difficult situation.”
Most economists think that a global economic downturn is about to take place.
In tourism paradigms such as Thailand, Indonesia, Turkey, and South Africa, anti-epidemic measures applied on a global scale are at risk of mass unemployment in the hotel and restaurant industry. tour organization.
Industry disruptions around the world have drastically reduced demand for raw materials, critically struck copper producers such as Chile, Peru, Congo and Zambia, or zinc producers. like Brazil and India.
Mexico has been in a recession and many industries in the country serve to produce goods into the US. But the United States is now almost completely blockaded to fight Covid-19.
In wealthy countries, governments and central banks have launched trillions of dollars worth of bailouts to limit damage to the economy when people are restricted from leaving their homes. But in poor countries, community isolation is almost impossible. Those who make a living collecting garbage at the landfill will not be able to sustain a life if forced to stay at home.
India, a nation of 1.3 billion people, seems to have taken Covid-19’s blow, though the number of infections is not too high. Prime Minister Narendra Modi on March 24 issued a nationwide blockade order to prevent the virus from spreading.
One recent afternoon on the road leading to New Delhi’s main train station, roadside shop owners were facing a harsh truth: The streets were deserted.
Mahender, 60 years old, is a shoe shineer. Before the epidemic, he made about 400 rupees (about 5 USD) per day. Now, he only earns $ 1.25, a quarter of the previous.
In Cappadocia, Turkey, a scenic area with magnificent spire-shaped rocks, Deniz Turgut, 37, co-owner of Butterfly Balloons, is struggling as the cost is still paid but the revenue is small. day.
Last year, the company put about 20,000 travelers on a balloon. In February, Butterfly Balloons only 43 guests, less than the company employees (49 people). Turgut had to be reluctant to leave his employees.
“We don’t know how long this situation will last,” she said.
In Istanbul, Gürsel Yenilmez, 42, last week closed a cafe in the Beyoglu district. His facility could not afford to pay bank interest, rent and utility bills. Yenilmez also canceled orders for olive and olive oil in rural Turkey.
“I cannot buy anything from them and pay immediately,” he said.
In Manila, Philippines, Reynaldo Tating, 57, is suffering from an unwanted vacation at home.
He usually spends 8 months a year on cruise ships traveling around the world, preparing cocktails for international tourists. Now, he worries that his company, a large yacht operator, might go bankrupt.
“I don’t know if I can get back to work or if we still have work to do,” he said.
Covid-19 in the World [25 March 2020]
|Bosnia & Herzegovina||168||3|
|Trinidad & Tobago||57|
|Isle of Man||23|
|Antigua and Barbuda||3|
|Papua New Guinea||1|
|St. Vincent Grenadines||1|
|Turks and Caicos||1|