A Full-Blown Employment Crisis In Emerging Economies
Emerging economies are facing an unprecedented health and economic crisis. The synchronous collapse in global demand and the widespread disruptions in supply chains are inflicting severe economic pain through trade, financial and commodity prices channels. To contain the pandemic, emerging economies have imposed, to varying degrees, lockdowns and social distancing measures, further disrupting economic activity. India, Indonesia, Mexico, Nigeria, the Russian Federation and South Africa have implemented full or partial lockdowns. But even as countries have followed different approaches to contain the COVID-19 pandemic, enforcement has in many cases been difficult as a result of high population density in major cities. Despite the different situations regarding the spread of the virus, all emerging economies are suffering severe economic pains, with most of them experiencing a major downturn this year. Economic activity is shrinking at an exceptional scale and speed. According to projections from the World Economic Situation and Prospects as of mid-2020, GDP in emerging economies is projected to contract, on average, by 3.2 per cent in 2020. GDP in Brazil, Mexico and South Africa is projected to shrink by more than 4.5 per cent this year, and only in Indonesia, growth is projected to remain in positive territory. This contraction is unmatched by any other crisis on record. During the financial crisis, for example, India, Indonesia and Nigeria were barely affected. Others that were more impacted—Brazil, Turkey and Saudi Arabia—quickly returned to robust growth. In addition, the outlook for 2021 is highly uncertain. While the current baseline scenario projects economic activity to grow by 3.4 per cent next year in these countries, significant uncertainties and downside risks are in place.