How Emerging Economies Should Weather the Post-Pandemic Era
Governments of emerging economies must build more hospitals, train more doctors, and invest more in health care systems.
No country is immune from the COVID-19. Undoubtedly, the virus has dealt a heavy blow to emerging economies. There is a twin-shock for them: Internally, to prevent the spread of the virus, the central government of every emerging economy has adopted a lockdown policy, causing great damage to their economy; externally, the global value chains, along with the globalization of production, trade, and finance, have been negatively affected by the spillover effect of lockdowns.
What’s to be done? There is no one-size-fits-all policy for each emerging economy in the post-pandemic era. However, to ensure a brighter and healthier future for their development prospects, it is in their best interest to make the following wish-list a reality.
The top priority is to stimulate the economy. To achieve this goal, prudent monetary policies and active fiscal policies should be implemented. However, countries need to proceed carefully with the implementation of said policies as their macroeconomic room for maneuverability is limited, particularly as the world economy is starting to sink into recession.
Moreover, in the process of designing macroeconomic policy tools for economic recovery, emerging economies should try their best to avoid debt default as its knock-on effect can easily turn into a debt crisis.
They also need to attract more foreign investment by improving the investment environment. The troika of growth, i.e. consumption, investment, and exports, can no longer be relied on as loss of income has hindered consumption. As a result, investment is the only powerful growth engine. As domestic investment dwindles, foreign investment becomes all the more important. But because the hurdles to secure foreign investment are numerous, emerging economies must first pay added attention to improving their investment environment.
In the age of globalization and the fourth industrial revolution, which has already influenced mankind in every aspect, competition has become more and more important. Hence, emerging economies must become more innovative, creative, and competitive. From e-commerce to 5G, and from AI to blockchain, emerging economies must attempt to close the gap with advanced economies.
Economic recovery in emerging economies will not materialize if external conditions are not improved, so they must join hands to resist trade protectionism and unilateralism by speaking with one voice.
In the social arena, emerging economies should design a policy tool package to help reduce economic loss within the sectors hardest hit such as transportation, tourism, and retail, etc. Special subsidy and/or investment might need to be implanted accordingly. Furthermore, attention must be paid to vulnerable groups like the self-employed in the informal sector. One of the main reasons for the drastic spread of COVID-19 in emerging economies is because those in the informal sector are more at risk.
It is a sad reality that, in many emerging economies, not all COVID-19 patients can receive appropriate or immediate treatment due to imperfect health systems. Therefore, governments of emerging economies must build more hospitals, train more doctors, and invest more in health care systems.
The Chinese economy has successfully returned to positive economic growth. The country has also done its best to help others since the beginning of the pandemic, offering various types of assistance to others and helping to contain the situation in some emerging economies.
It has also been a good opportunity for China and other emerging economies to cooperate under the framework of the Belt and Road Initiative to stimulate post-pandemic economic recovery.
Jiang Shixue is Senior Research Fellow of the Chinese Academy of Social Sciences and Distinguished Professor of the Shanghai University.