The COVID-19 Crisis in Emerging Markets Demands a Once-in-a-Century Response
By Brad W. Setser
The novel coronavirus plunged emerging markets into crisis. As investors rushed to safety, major emerging economies lost more than $100 billion in foreign currency reserves in the month of March alone. Trade flows shrank. New capital inflows dried up. In many ways, the pandemic has been harder on emerging economies than the 2008 global financial crisis.
But not all emerging markets have suffered equally or from the same ailments. Some economies are still included in emerging-market indices even though they have mostly emerged: South Korea and Taiwan, for example. These, along with other emerging economies, such as Thailand, that have strong balance sheets, face what might be called “First World problems”: worries over how to maintain employment while managing the public health threat from COVID-19, the disease caused by the novel coronavirus.
Photo courtesy of Sebastian Estrada.