Economic consequences of the corona pandemic for developing countries and emerging markets

The spread of the corona virus (COVID-19) causes not only a high number of illnesses and deaths but also enormous economic damage. For many developing countries and emerging markets, whose economic development is fragile irrespective of this pandemic, the economic consequences may be even more serious than for most industrialized nations.

Dr. Thieß Petersen

Senior Advisor

Dr. Hauke Hartmann

Senior Expert

Content

In the following focus paper, we explore and discuss the economic consequences of the coronavirus pandemic in developing countries and emerging markets. We point out that most of these countries are economically ill-prepared to deal with a massive shock like the COVID-19 pandemic. Underlying structural weaknesses include the inherent instability of resource-driven growth, often combined with bad economic governance and resulting in many cases in a severe state of overindebtedness. The already existing vicious circle of chronic current account deficits, national currency devaluation and rising foreign debt will be intensified in crisis times by capital withdrawal, falling demands and plummeting world-market prices. As overburdened health sectors and a severely limited political capacity to act combine, a long-term deterioration of social systems is looming.