Many emerging markets around the world ended 2019 on a positive note with notable signs of growth and prosperity going into the new decade. Quickly though, the COVID-19 pandemic caused global economic upheaval, arguably felt most by those countries that have consistently struggled to find long-term stability.
Just a few months into 2020, the pandemic impacted the global economy in profound ways. Prior to the outbreak, Standard & Poor’s (S&P) forecasted growth for the year at 3.3%, but near the end of March, S&P’s global chief economist marked it down to just 0.4%, the lowest forecast since the Great Depression. Adding to that, the Congressional Research Service (CRS) estimatesglobal trade could drop anywhere between 13% and 32%. These forecasts are devastating for all markets throughout the world, but especially for those who were already struggling or just beginning to grow.
What is impacting markets during the COVID-19 pandemic?
Diminished demand for goods and services
As social distancing began to ensue, it caused businesses, organizations and workplaces across the globe to temporarily, and some permanently, shut down, as people were purchasing fewer good and services. The widespread drop in demand severely halted production – the engine behind a country’s gross domestic product (GDP) – even bringing the global cost of oil below $0.00 in mid-April.
Furthermore, as noted in the aforementioned CRS report, the World Trade Organization (WTO) predicts that global trade volumes will decrease by at least more than 10% this year in every continent, threatening the collapse of many emerging markets, especially those who are highly dependent on export products.
Health infrastructures in developing countries
The pandemic has put a significant strain on health care systems across the world, even more so in developing countries where people may need it the most. Per capita, health care spending in emerging markets “is just 5% that of richer nations,” MarketWatch reported.
According to the World Bank, Madagascar and Ethiopia only have 20 and 30 hospital beds, respectively, per 100,000 residents. These, and other countries like them, are places where residents commonly don’t have the ability to practice the social distancing protocols that will help to slow down the spread of COVID-19.
Decrease in travel, trade and immigration due to restrictions
Not only are social activities being restricted within countries, but international activities too are taking a hit. According to the New York Times, “at least 93% of the global population now lives in countries with coronavirus-related travel restrictions.”
Nations across the world have imposed travel, trade and immigration restrictions to protect the health and well-being of its citizens, but with the potential cost of jeopardizing international business opportunities in emerging markets.
Increasing debt and concerns of default
Many growing and emerging markets are fueled by global investors that rely on enough income and success to pay down investment debt. With emerging markets collectively owing $8.4 trillion, almost a third of the developing world’s GDP, and the recent economic impact of COVID-19, countries across the globe face a possible reality that they may need to default on these debts.
Businesses in emerging markets must have a continuity plan in place for the post-pandemic economy
The sudden economic crash brought on by the coronavirus can make any organization feel discouraged. Still, it’s critical that you have the right course of action and continuity plan in place to ensure your organization will prevail once the pandemic is over. It should also lay out a step-by-step plan so employees, clients and other constituents are informed and ready to go once things are back to normal.
For those businesses and organizations who had a plan in place well before the COVID-19 pandemic hit, now is the time to re-evaluate it and make any necessary changes to set your employees and business up for success. With the COVID-19 crisis continuing to evolve, organizations with existing or planned international operations must consistently monitor the current landscape, and revise those plans as necessary.
If you need help reassessing your company’s international relocation plans in the midst of the COVID-19 pandemic, be sure to reach out. GoRelo specializes in assisting organizations navigating the many nuances associated with both international and domestic relocation.
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