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COVID-19: The Impact On Developing Economies

The coronavirus pandemic has hit global economies hard. But how have developing economies been affected by the virus?

Thu Jun 25 2020

BusinessBecause  

7

The Covid-19 crisis, which first hit the developed world, is now spreading into developing countries. Experts from the United Nations (UN), United Nations Development Program (UNDP), and the World Health Organization (WHO) have stressed deep concern about the long-term impact the pandemic could have on these nations.

Developing countries tend to be poorer, working to become more advanced economically and socially––their infrastructures aren't as established as those you find in Europe and the US. They also rely on primary sector roles––all activities that consist of exploiting natural resources, like agriculture, mining, and forestry––and so they are particularly impacted by disrupted supply chains and lower demand for their goods.

If a poorer country can't sell its resources, then a huge percentage of its national businesses and workforces are going to feel the pinch. Therein lies the problem when a global pandemic hits and their richer trading partners shut their borders.

As a result, developing countries could see income losses in excess of $220 billion, according to the United Nations Development Program (UNDP).

The UNDP are putting plans in place to support them during the pandemic and beyond it, but is it too little too late? 


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Developing economies | Why will be they be especially impacted?

Developing economies are less diversified. HEC Paris professor of economics and decision science, Tomasz Michalski, says that with increased reliance on fewer industries––largely in manufacturing, resourcing, and tourism––developing countries struggle to continue generating revenue in times of market volatility. For example, with supply chains disrupted by closed borders, manufacturing companies are taking a big hit.

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Relations between international economies is something Tomasz focuses on in his teaching, leading courses in Macroeconomics and International Economics in the Grande Ecole and other MSc programs at HEC Paris. 

"They have limited room for monetary or fiscal policy intervention,” Tomasz (pictured) explains. If you are wholly reliant on few industries rather than diversified across markets, then there’s less chance you are able to guarantee liquidity––essentially moveable cashflows that can help an economy remain reactive to the wider macroeconomy. If you have cash to hand, then you can move your money more quickly, investing it where it's most needed.


The impact on poorer countries right now

Already, more than 90 developing countries have approached the International Monetary Fund (IMF) for access to its emergency funding and financial assistance. 24 of the IMF's low-income member countries are benefiting from immediate debt relief so far. But the IMF is calling for the temporary suspension of debt payments to banks for the poorest developing countries.

If we look at Sub-Saharan African governments as an example of how fiscal inflexibility is damaging their economies when faced with closed borders and disrupted supply chains, we’re seeing the impact through depressed commodity revenues (less money for tradeable goods), a collapse in tourism, and lack of foreign investment. 

“When you see a drop in demand as we are right now, with tourism for instance, we’re seeing economies being brought to their knees,” independent consultant and lecturer (currently teaching at Stanford Graduate School of Business) Giovanna Prennushi, explains. 

The issue is more than financial. Fighting the impact of coronavirus goes beyond a country's ability to repay debt or keep its economy moving. Healthcare systems in the developing world often lag behind those found in developed nations, both in terms of technology and capacity. This hampers the initial response to dealing with a surge in patients, but also means countries may be less equipped for a second wave of infection. 


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The stress on healthcare in developing countries 

Despite all of this, what’s been surprising is that countries reporting the highest numbers of cases and deaths are wealthier, with developing countries making up just 2% of the global death toll (as of May 2020).  

As a former World Bank economist, with over 20 years of experience evaluating and supporting economic development in African and South Asian countries, Giovanna points out that the numbers being reported by developing countries likely don’t reflect the true impact. “The caveat is that the testing done in developing countries is much, much less than what we’ve had in developed countries or in Europe.” 

In other words, not every case is identified and reported, due to lack of resources.  

This lack of resources and disparity in available healthcare is a big problem for developing countries, Giovanna adds. African countries, on average, have 2.2 qualified healthcare workers per 1,000 people (compared to 14 per 1,000 in Europe). Nigeria is reported to have fewer than 500 ventilators, which are crucial to treating the more serious cases of COVID-19.   

“One thing that’s clear is that some countries have better access and funding to top-of-the-line healthcare than others,” Giovanna continues.  

Countries like China, who are easing out of lockdown, have begun to offer large in-kind medical donations to less developed countries. Some have labelled this “facemask diplomacy”.  

Many countries have turned inward during the crisis, dealing first with the stress within their own healthcare systems before looking to assist other struggling nations. This means developing countries are simply not being offered the same level of support––both financially and through healthcare––than they would if this was a crisis solely impacting the developing world 

“I think the pandemic will continue to widen the gap,” says Giovanna, who has been teaching courses at Stanford that focus on reducing worldwide poverty and addressing economic disparity between developing and developed countries. She fears that the pandemic will undo some of the progress that's been made in recent years. But what will this look like?


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Covid-19: The future impact on developing economies

Tomasz predicts that we’re likely to see an increase in emigration from developing countries, as laid-off workers look for jobs elsewhere––most likely in more developed countries. That will have an impact in two ways. It would leave poorer countries with less workers to fill essential jobs and contribute to the economy, and also put pressure on developed countries to support the inflow of new workers.

If developing countries are losing their workforce, then economic recovery will be slower, and the prospect of paying off debt becomes far more overwhelming.

“I expect difficulties in repaying [...] debt in the years to come,” he says. “The situation in many countries may in fact become so dire that they may experience widespread hunger and state failure, with a decade lost to economic growth.” 

To put it simply: if developing countries aren’t generating money, they can’t meet the terms of loans provided by developed countries and banks––such as the US Federal Reserve and European Central Bank. 


Read more on Page 2 

Student Reviews

HEC Paris

Student

Verified

7/07/2022

On Campus

Cultural experience

I have met the most competent and diverse batch in this school. These people not only thrive on their own but also makes sure that you are doing it with them. The professors will take your had and walk you through all milestones and make sure you are not left behind. I have found their extracurriculars extremely engaging. There was always a room to have social life after academic life. The only hindrance is the location of the school, it is slightly outside city and living in city is expensive.

Sarah

Verified

18/03/2022

On Campus

Internationality and diversity of opportunities

About my programme I would say it is very international and flexible: we have the opportunity to choose exactly the courses we want. But at the same time, the frame of the campus is crucial in students' life and enable us to create friendships.

Student

Verified

29/10/2021

On Campus

Great selection of people

While HEC's MBA is highly selective, I really enjoy the type of people HEC's selects to make sure everybody gets the best out of their MBA experience and networking opportunities. Not only it's an incredibly diverse pool of people (~60 nationalities) but most importantly they make sure to let in friendly empathic and curious people.

Veronique

Verified

28/10/2021

Blended

Best in France for Grande ecole

A prestigious business school. Languages ​​are important. It is better to have a scientific baccalaureate with excellent grades in high school and good assessments. The courses are well designed as per the latest trends and practicality of learning in stressed upon. Overall, a very good experience.

Ghadi

Verified

11/06/2022

On Campus

Diversity and quality of fellow students

Very international and interesting place to be and opens a lot of opportunities, however the administration is very french and facilities are subpar (gym, classrooms) meaning the academic affairs is pretty much useless and lastly we are graded on a curve which can create a toxic environment because of the competition. With that being said the pros outweighs the cons by far.

Student

Verified

27/03/2022

On Campus

The quality of the teachers, the campus, the clubs

The school is very international indeed, we have courses with international students and share things with them within the extra academic life (in the social clubs especially). We have great career prospects if we prepare ourselves well - however, the global curriculum is still very finance-oriented, which is a pity for other interesting domains of the company world, which does not rely on finance only. The social clubs are good practice for the management and for now, are quite independent.

Lb

Verified

26/03/2022

On Campus

HEC Paris awaits you

HEC Paris is really a nice place to do a master's in business. Many classes are useful and interesting (corporate finance, financial accounting, contract law…), some are less - but the curriculum is to be reviewed in the year to come. Regarding the student life, it is incredible, with about 130 clubs, lots of great parties with even greater people. The Jouy campus offers a lot of opportunities to do sports, and you can breathe fresh air every day. HEC also helps a great deal to find an internship or a job.

Rajarshi

Verified

28/10/2021

Blended

A dream institute

Enrolling in the HEC MBA was by far the best decision I made for myself. The people and faculty are great, with lots of opportunities to meet people and expand your horizons. Very nice campus where I have had some good running sessions. The alumni network is superb and very helpful. It also has a good support system for entrepreneurs. Would definitely recommend it!

Student

Verified

19/10/2021

On Campus

Good choice for a career boost

The classes were extremely practical and relevant to the current challenges that businesses are facing. You have access to a wide range of professionals and good career prospects once you leave the university.

Student

Verified

7/07/2022

On Campus

Cultural experience

I have met the most competent and diverse batch in this school. These people not only thrive on their own but also makes sure that you are doing it with them. The professors will take your had and walk you through all milestones and make sure you are not left behind. I have found their extracurriculars extremely engaging. There was always a room to have social life after academic life. The only hindrance is the location of the school, it is slightly outside city and living in city is expensive.

Sarah

Verified

18/03/2022

On Campus

Internationality and diversity of opportunities

About my programme I would say it is very international and flexible: we have the opportunity to choose exactly the courses we want. But at the same time, the frame of the campus is crucial in students' life and enable us to create friendships.

Student

Verified

29/10/2021

On Campus

Great selection of people

While HEC's MBA is highly selective, I really enjoy the type of people HEC's selects to make sure everybody gets the best out of their MBA experience and networking opportunities. Not only it's an incredibly diverse pool of people (~60 nationalities) but most importantly they make sure to let in friendly empathic and curious people.

Veronique

Verified

28/10/2021

Blended

Best in France for Grande ecole

A prestigious business school. Languages ​​are important. It is better to have a scientific baccalaureate with excellent grades in high school and good assessments. The courses are well designed as per the latest trends and practicality of learning in stressed upon. Overall, a very good experience.

Ghadi

Verified

11/06/2022

On Campus

Diversity and quality of fellow students

Very international and interesting place to be and opens a lot of opportunities, however the administration is very french and facilities are subpar (gym, classrooms) meaning the academic affairs is pretty much useless and lastly we are graded on a curve which can create a toxic environment because of the competition. With that being said the pros outweighs the cons by far.

Student

Verified

27/03/2022

On Campus

The quality of the teachers, the campus, the clubs

The school is very international indeed, we have courses with international students and share things with them within the extra academic life (in the social clubs especially). We have great career prospects if we prepare ourselves well - however, the global curriculum is still very finance-oriented, which is a pity for other interesting domains of the company world, which does not rely on finance only. The social clubs are good practice for the management and for now, are quite independent.

Lb

Verified

26/03/2022

On Campus

HEC Paris awaits you

HEC Paris is really a nice place to do a master's in business. Many classes are useful and interesting (corporate finance, financial accounting, contract law…), some are less - but the curriculum is to be reviewed in the year to come. Regarding the student life, it is incredible, with about 130 clubs, lots of great parties with even greater people. The Jouy campus offers a lot of opportunities to do sports, and you can breathe fresh air every day. HEC also helps a great deal to find an internship or a job.

Rajarshi

Verified

28/10/2021

Blended

A dream institute

Enrolling in the HEC MBA was by far the best decision I made for myself. The people and faculty are great, with lots of opportunities to meet people and expand your horizons. Very nice campus where I have had some good running sessions. The alumni network is superb and very helpful. It also has a good support system for entrepreneurs. Would definitely recommend it!

Student

Verified

19/10/2021

On Campus

Good choice for a career boost

The classes were extremely practical and relevant to the current challenges that businesses are facing. You have access to a wide range of professionals and good career prospects once you leave the university.

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