Why the Covid economic crisis has hit poorer nations less deeply than feared

Why the Covid economic crisis has hit poorer nations less deeply than feared

Last March, when Covid-19 infected the world economy, many observers feared that emerging markets and developing countries would suffer the most, financially and otherwise. Economically, they relied on commodity exports, remittances, and tourism, all of which fell through the floor with the pandemic. There was every reason to expect a tsunami of financial crises and debt defaults.

The tsunami never arrived. Just six countries - Argentina, Ecuador, Belize, Lebanon, Suriname, and Zambia - have defaulted on their sovereign debt, and only the first two have restructured their debts.

But much like Sherlock Holmes's dog that didn't bark, it's hard to know whether to be reassured or alarmed by the silence. Reassuringly, the impact of Covid-19 on developing countries, in Africa specifically, has been less than feared. Their young populations are relatively resistant to the coronavirus. Their health systems, in responding to past epidemics, have gained the public's trust. And China's quick recovery boosted demand for their commodity exports.

Financially as well, current conditions are surprisingly stable. In March, when the crisis erupted, emerging markets haemorrhaged capital. In April, however, the outflows tailed off, and net flows to emerging economies have been positive and growing since.

It is not hard to see why. Yields on