The virus has yet to arrive at full strength in developing countries, but poor health care facilities and weak finances point to grim times ahead. For most, the pandemic already rivals the 2008 global financial crisis.
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A majority of the so-called emerging economies have younger populations and suffer from connectivity issues, so, they may not be as vulnerable to the coronavirus as their more advanced peers. The good news ends there.
The developing countries are staring into what could be a deep and prolonged recession as the rapidly spreading coronavirus pandemic forces more than a quarter of mankind indoors, bringing the global economy to an unprecedented halt.
While COVID-19 has yet to arrive in full force in emerging markets — barring China, where the disease originated and wreaked havoc in a key industrial region — their fragile finances, crumbling health care infrastructure and overdependence on commodities such as oil make them more vulnerable than the current hotspots in the West.
"In many respects this is worse than the global financial crisis for the emerging markets," Nariman Behravesh, chief economist at IHS Markit, told DW. "The collapse in commodity prices is bigger, the recession in the developed world is worse and the debt levels in the emerging world have risen largely since the financial crisis because interest rates have been so low."
Developing countries across Asia, Africa and Latin America are suffering from lockdowns imposed to contain the virus: Their key export markets in Europe and North America have virtually been killed, local economies have come to a standstill, demand for commodities, including oil, has collapsed, and their currencies have taken a battering.
Economists at Oxford Economics ranked Bolivia, Costa Rica, Nigeria, Peru, South Africa, and Egypt as the most vulnerable emerging economies based on the state of their health systems, fiscal positions, and reliance on commodities.
Heightened risk of debt defaults
Foreign investors rushing for safer havens are turning their backs on emerging market bonds and shares. In March, more than $80 billion (€73 billion) in investment fled from a group of over 20 emerging economies, including India, China, South Africa and Turkey, according to the Institute of International Finance. The outflow dwarfs the capital flight seen during the 2008 crisis by a margin.
The massive withdrawal of capital has raised the specter of defaults in the most vulnerable economies such as Argentina, Nigeria and Angola, which saw its dollar-denominated sovereign bond maturing in November 2025 jump to nearly 30% last week, from under 7% at the beginning of March, according to the Wall Street Journal.
Higher borrowing costs would especially hurt countries such as Turkey and South Africa, which have depended on external borrowing in recent years to fund infrastructure projects like a new airport in Istanbul.
Encouraged by low US interest rates, emerging economies have piled up billions in dollar-denominated debt in the past few years. A recent rally in the dollar would make interest payments on these bonds more expensive, a painful prospect especially at a time the bond issuers are seeing exports plummet due to shutdowns. Emerging market currencies saw one of the biggest sell-offs on record in March, rivaling the fall seen during the 2008 crisis. The Russian ruble, the Mexican peso and the South African rand were the worst-hit, losing 11-20% against the dollar.
People are wearing protective masks in Cairo. Egypt's economy is ill-prepared to weather the coronovirus crisis, experts sayImage: picture-alliance/NurPhoto/I. Safwat
For Turkey, the pandemic threatens to revive the pains of the 2018 currency crisis, when investors went cold on the economy and pulled out their funds, causing the lira to plunge to record lows and tipping the economy into a recession. South Africa, Africa's most industrialized nation, is entering the pandemic in an extremely weak position with its economy in recession, business confidence lowest in over 20 years and almost a third of the labor force unemployed.
India, which has seen its public finances deteriorate over the last couple of years amid slowing growth and record unemployment, is also in a relatively weak position to face the crisis. The Indian government has declared a 21-day national lockdown to combat the virus.
"India also faces capacity issues. It's a huge country with over 1 billion inhabitants and just coordinating a response across different regions is logistically very challenging. So, they too can be quite hard-hit," Per Hammarlund, chief emerging markets strategist at Swedish investment bank SEB Group, told DW. "Social tensions could also rise in a country like India, which is already simmering with social discontent."
Oil shock
The emerging world's problems have been compounded by a dramatic drop in the prices of oil and other commodities, which are a major source of revenue for several African and Latin American countries.
A record decline in demand due to the pandemic coupled with a price war between Saudi Arabia and Russia has dragged oil prices to their lowest levels in 18 years, causing a major crisis for countries like Angola and Nigeria, which depend on the commodity for 90% of their export earnings. The low oil prices are also hurting Russia — one of the world's biggest oil producers — which has seen its ruble plummet in the past month.
Many energy-producing economies in the emerging world are ill-prepared for lower prices, with three in every four countries running fiscal deficits, economists at Oxford Economics said in a note to clients.
Some emerging economies such as Thailand, Croatia and the Philippines, and Turkey, which depend on tourism for 20-25% of their gross domestic product, are bracing for mass layoffs as unprecedented travel bans keep people homebound.
Creaking health infrastructure
As infection rates rise rapidly in key economies such as India and South Africa, health experts are keeping their fingers crossed. They fear that once the virus gets out of hand in a country like India, it would be difficult to contain, given their overcrowded cities and often stretched and inadequate medical facilities.
The poor state of health care in emerging countries is forcing many of them to adopt sweeping social distancing measures. But, unlike in the West, social distancing in poor countries, where families cram into slums and survive on daily wages, is not that simple.
"We identify some economies where the economic costs could be so large that they shake confidence deeply, leading to sovereign and/or financial crises," economists at Oxford Economics said. "In this sense, saving lives will turn out to be dramatically more costly than in advanced economies. And even if the economic disruption is extreme, reversing course may be very difficult."
Coronavirus: Timeline of the global spread of COVID-19
Since the first cases were confirmed in December 2019, the flu-like COVID-19 virus exploded into a global pandemic, killing tens of thousands of people and infecting around 800,000. Scientists scramble for a vaccine.
Image: picture-alliance/dpa/SOPA Images/A. Marzo
Pneumonia-like virus hits Wuhan
On December 31, 2019, China notifies the World Health Organization of a string of respiratory infections in the city of Wuhan, home to some 11 million people. The root virus is unknown and disease experts around the world begin working to identify it. The strain is traced to a seafood market in the city, which is quickly shut down. Some 40 people are initially reported to be infected.
Image: Imago Images/UPI Photo/S. Shaver
First death in China
On January 11, China announces the first death from the coronavirus — a 61-year-old man, who had shopped at the Wuhan market, dies from complications with pneumonia. Like SARS and the common cold, scientists identified that the new virus is in the coronavirus family. It is temporarily named 2019-nCoV. Symptoms include fever, coughing, difficulty breathing, and pneumonia.
Image: Reuters/Str
Virus reaches neighboring countries
In the following days, countries such as Thailand and Japan begin to report cases of infections in people who had visited the same Wuhan market. In China, a second fatality is confirmed in the city. By January 20, three people have died in China and more than 200 are infected.
Image: Reuters/Kim Kyung-Hoon
Millions under lockdown
China places Wuhan on quarantine on January 23 in an attempt to limit the spread of the virus. Transportation is suspended and workers attempt to quickly build a new hospital to treat infected patients, which total over 830 by January 24, as the death toll climbs to 26. Officials eventually extend the lockdown to 13 other cities, affecting at least 36 million people.
Image: AFP/STR
A global health emergency?
More and more cases are confirmed outside of China, including in South Korea, the US, Nepal, Thailand, Hong Kong, Singapore, Malaysia and Taiwan. As the number of infections rises, the World Health Organization on January 23 determines that it's "too early" to declare a global public health emergency.
Image: Getty Images/X. Chu
Coronavirus reaches Europe
On January 24, French authorities confirm three cases of the new coronavirus within its borders, marking the disease's first appearance in Europe. Hours later, Australia confirms four people have been infected with the respiratory virus.
Image: picture-alliance/dpa/S. Mortagne
First cases confirmed in Germany
On January 27, Germany announces its first known case of the virus — a 33-year-old in Bavaria who contracted it during a workplace training with a visiting Chinese colleague. He is put under quarantine and observation at a Munich hospital. The following day, three of his colleagues are confirmed infected. The death toll in China reaches 132, with around 6,000 infected worldwide.
Image: Reuters/A. Uyanik
WHO declares global health emergency
On January 30, the UN's World Health Organization (WHO) declares coronavirus a public health emergency of international concern in a bid to protect countries with "weaker health systems." However, WHO Secretary-General Tedros Adhanom Ghebreyesus does not recommend trade and travel restrictions, saying these would be "an unnecessary disruption."
Image: picture-alliance/KEYSTONE/J.-C. Bott
First death outside China
The first death linked to the novel coronavirus outside of China is reported in the Philippines on February 2. A 44-year-old Chinese man had traveled from Wuhan to Manila before falling ill and being taken to hospital, where he later died of pneumonia.
Image: Getty Images/AFP/T. Aljibe
Bad ending to a cruise
Also on February 3, the cruise ship Diamond Princess is quarantined off Yokohama in Japan after cases of the new coronavirus were found on board. As of February 17, the number of people infected has grown to more than 450, the largest cluster of cases outside of China. Several of the 3,700 passengers and crew onboard the ship are being or have been flown back to their home countries.
Image: picture-alliance/dpa/kyodo
Italy under quarantine
Cases in Italy rise dramatically, with 77 deaths and thousands of confirmed cases by March 3. Many countries instigate travel restrictions to northern Italy and tourist numbers plummet. On March 8, the Italian government put the entire Lombardy region into quarantine, affecting 16 million people. March 10 sees 168 fatalities in Italy, the highest in a single day.
Image: Reuters/R. Casilli
Economic woes
European and US stock markets slump on March 6, leading to the worst week since the 2008 financial crisis. The effect on global business has been significant, with many companies reporting losses and the tourism industry and airlines badly hit. The EU pledge €7.5 billion ($8.4 billion) on March 10 in an investment fund to try to stop the Eurozone falling into a recession.
Image: picture-alliance/Jiji Press/M. Taguchi
WHO declares outbreak as pandemic
As worldwide cases top 127,000 and deaths pass 4,700, the World Health Organization designates the global outbreak as a "pandemic" on March 11. US President Donald Trump announces a travel restriction on people coming from the Schengen Zone in Europe, annoying the EU. German Chancellor Angela Merkel announces that in Germany, 70% of the population could get the virus.
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Public life on hold in Europe
On March 14, Spain joins Italy in imposing a near-total nationwide lockdown to prevent the virus spreading. The population of 46 million is told not to leave their homes unless for essential tasks. In France, cafés, restaurants and non-essential shops are closed as of March 15. Many public events in Germany are cancelled and schools close.
Image: picture-alliance/dpa/AAB. Akbulut
International travel severely restricted
As of March 15, many countries impose strict travel bans or restrictions in an attempt to stop the spread of Covid-19. For example, New Zealand and Australia require all international passengers to self-isolate for 14 days after arrival in the country. The US extends a European travel ban to include the United Kingdom and Ireland.
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Germany imposes partial lockdown
In a landmark televised address German Chancellor Angela Merkel announces far-reaching restrictions on everyday life on March 22, banning meetings between more than two people not from the same household outside of the workplace. The country has a surprisingly low death rate, a phenomenon attributed to a high level of testing, and a high number of intensive care beds.
Image: picture-alliance/EibnerT. Hahn
Virus strikes at top as UK locks down
On March 23rd Britain becomes the latest country to impose restrictions on personal freedoms, with people only allowed to leave their homes in a limited number of circumstances. Prime Minister Boris Johnson is diagnosed with the viruson March 27, as well as heir to the throne Prince Charles on March 25. Meanwhile, there are complaints that not everyone is taking social distancing seriously.
Image: picture-alliance/R. Pinney
Grim milestone for the US
On March 27 the US overtakes China in terms of the number of people infected, making it the country with the most cases of COVID-19. This came as President Donald Trump claimed that the nation would get back to work "pretty quickly." At the same time, it emerged that more than 3 million Americans had lost their jobs due to the pandemic. New York is worst-hit, with a hospital ship sent to help out.
Image: picture-alliance/Photoshot/J. Fischer
Spain's surging death toll
Spain also overtakes China in the number of COVID-19 cases on March 30, as the government toughens the severity of its lockdown. All non-essential activities are halted. Only Italy has a higher death toll than Spain. Most affected is the capital, Madrid. With funeral services overwhelmed, officials turn the Palacio de Hielo ice skating rink into a temporary morgue.
Image: picture-alliance/Geisler-Fotopress
More than a million
On April 2nd the Johns Hopkins University announced on Thursday that there were more than a million confirmed coronavirus cases around the world. The US is the most affected with three times the number than China, where the virus emerged in December. Over 50.000 people have died — and the outlook remains grim.
Image: Reuters/J. Redmond
UK PM Boris Johnson hospitalized
The 55-year-old was admitted to the intensive care unit at London's St Thomas hospital on Monday evening (6.4.) and was given oxygen treatment after his condition worsened. He had been diagnosed with COVID-19 on March 27.
