While the coronavirus pandemic has damaged developed and developing markets, economists fear it will have a disproportionate impact on emerging economies.
"The crisis hit (emerging markets) in the exact opposite way to us," said Megan Greene, global chief economist and senior fellow at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School, Cambridge, Mass. "For the U.S. and Europe, we got the virus first and then it impacted the economy and fed through into financial markets. In emerging markets, they were first hit by the impact in financial markets — (they saw) massive capital outflows which fed through into economies and, except for China, then the virus hit."
Amlan Roy, global chief retirement strategist and senior managing director at State Street Global Advisors in London, said the concern is that 62% of world GDP growth has come from emerging markets over the past 19 years. "If 62% of that growth takes a long time to recover, world growth is going to suffer," Mr. Roy said.
Emerging markets have less capacity in their health-care systems to address the pandemic and their economies are taking huge hits — although not as large as developed markets. The International Monetary Fund projects 2020 global growth at -4.9%, with developed markets expected to contract 8% while emerging markets are expected to contract 3%. Next year, developed markets are forecast to bounce back to the tune of 4.8%, vs. a 5.9% rebound for emerging markets.
But now, more than ever, "we recognize the degree to which the emerging markets label in some ways obscures more than clarifies," said Mike Pyle, global chief investment strategist and managing director at the BlackRock Investment Institute, New York. "They are highly varying economies. … Beyond that, we think this is a moment where that heterogeneity is really pronounced and dispersion across the emerging world will be very high."