UN trade and development body says COVID-19 crisis sent economic shockwaves more dramatic than 2008 financial crisis
The UN trade and development body on Monday called for a $2.5-trillion package for two-thirds of developing countries, excluding China, to “turn expressions of international solidarity into meaningful global action” amid the global coronavirus pandemic.
“The speed at which the economic shockwaves from the pandemic has hit developing countries is dramatic, even in comparison to the 2008 global financial crisis,” said a report by UNCTAD.
“The economic fallout from the shock is ongoing and increasingly difficult to predict, but there are clear indications that things will get much worse for developing economies before they get better,” UNCTAD Secretary-General Mukhisa Kituyi said in the report.
The report also calls for the cancelation this year of $1 trillion in debt owed by developing countries and the formation of a $500 billion to fund a Marshall Plan for health recovery to be dispersed as grants.
The report shows that in the two months since the novel coronavirus began spreading beyond China, developing countries have taken an enormous hit in terms of capital outflows. There are also growing bond spreads, currency depreciation and lost export earnings, including from falling commodity prices and declining tourist revenues.
“On most of these measures, the impact has cut deeper than in 2008; and with domestic economic activity now feeling the effects of the crisis, UNCTAD is not optimistic about the kind of rapid rebound witnessed in many developing countries between 2009 and 2010,” the report says.
“Advanced economies have promised to do ‘whatever it takes’ to stop their firms and households from taking a heavy loss of income,” said Richard Kozul-Wright, UNCTAD’s director of globalization and development strategies.
He noted: “But if G20 leaders are to stick to their commitment of ‘a global response in the spirit of solidarity,’ there must be commensurate action for the six billion people living outside the core G20 economies.”
Portfolio outflows from the main emerging economies surged to $59 billion in a month between February and March, said UNCTAD, citing calculations.
Among the countries showing portfolio outflows were Brazil, India, Indonesia, the Philippines, South Africa, South Korea, Thailand and Turkey.
UNCTAD said this was more than double the outflows experienced by the same countries in the immediate aftermath of the global financial crisis, registering $26.7 billion.
The values of their currencies against the dollar have fallen between 5 percent and 25 percent since the beginning of this year — again, faster than the early months of the global financial crisis.
The prices of commodities, on which many developing countries heavily depend for their foreign exchange, have also dropped precipitously since the crisis began.
The overall price decline has been 37 percent this year, according to the report.