BlackRock Investment Institute

Macro insights

The emerging markets Covid-19 disparity

The hit from Covid-19 – and the outlook for economic recovery – varies widely across EMs. The disparity in the number of deaths is especially stark. Latin America has suffered more greatly than Asia. See the chart.

Regional daily new Covid-19 deaths per capita

Sources: BlackRock Investment Institute and the European Centre for Disease Prevention and Control, Oct. 2020. Notes: The chart shows daily new Covid-19 deaths for each country or region.

China is the only country expected to have positive GDP growth in 2020, according to the International Monetary Fund. Production and exports have rebounded in South Korea and Taiwan. Yet the outlook is less optimistic in other countries. For example, activity in India well below its pre-Covid levels. EM economies also vary in their ability to mobilize policy to bridge income gaps. Concerns around long-term monetary and financial stability have limited policy space. Inflation pressures could hinder the scope for further easing, alongside weaker currencies. This is most acute in Latin America and Turkey. EM debt to GDP ratios could reach the highest levels in the past 30 years, the IMF says, exceeding 100% in Brazil. Yet as long as U.S. monetary policy remains accommodative, the risk of an abrupt tightening in financial conditions remains low.

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