In the US we saw a steep decline in the economy in March and April, however had the fastest recovery from a bear market in history. This has not been the case for low income countries who are in some cases either still in or re-entering lockdown due to the virus are in a very different situation. These countries, such as Peru, Mexico, and India, rely heavily on manufacturing to carry their GDP. With a large portion of the workforce in quarantine, they are unable to produce at a level they are capable of. In Brazil, they government removed the cap on public spending, which increased capital outflows and increased interest rates. Globally interest rates are at historic lows leaving room quantitative easing programs to repurchase bonds. This has pushed a bond issuance from low income countries, allowing for money to re-enter markets. For Low income countries to avoid serious recessions they will need for programs similar to this to continue pushing their economy, as well as make a tough decision between avoiding lockdown to increase GDP or continue a lockdown and risk COVID mortalities.
https://www.ft.com/content/62358c60-f3f4-4961-a33f-76ab4ef91350?ocid=uxbndlbing
1 comment:
I think the developing and low-income economies had to take the most damage due to the pandemic. Poor public health system made it more difficult for these economies to efficiently survive the COVID crisis. I think the governments should strategically lift the lockdown in phases by opening some industries ensuring SOP’s are followed. Rather than re-entering lockdown, governments should go for a smart lockdown policy, where it’s easy to track and monitor possible hotspots and have the economy running on the other hand. Furthermore, I think that it’s the responsibility of stable economies and the IMF to provide developing countries with flexible assistance programs during these uncertain times.
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