The consequences of COVID crisis on emerging markets have been severe with millions pushed into extreme poverty, this, eventually led to the global economic contraction seen for the first time in at least 60 years in 2020.
According to the Fourth Quarter (Q4) of The Global Economic Conditions Survey (GECS), carried out jointly by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants),
The Survey disclosed that, following the adverse effect of Covid-19 Pandemic, millions have been pushed into extreme poverty with an income of less than $1.90 a day.
The process of catch-up, where incomes per head rise faster in EMs than in advanced economies, has been set back by up to 10 years in some cases, according to the World Bank. However, EMs are set for modest recovery this year.
Similar, the Q4 Global Economic Conditions Survey (GECS) points to little change in confidence but continued modest global economic recovery early in 2021.
In the survey, there was a further slight reduction in the ‘fear indices’ that customers and suppliers may go out of business. But these indices remain at high levels, well above long run averages.
This underlines the precarious state of the global economy at the turn of the year Looking at a regional breakdown, South Asia recorded the biggest jump in orders in Q4, although this was due to a large degree a catch-up from a fall in Q3.
More surprising is the slight dip in the orders balance in Asia-Pacific, the region that has performed best during the pandemic. Western Europe and South Asia report the strongest orders balances, although in all regions, orders are below the level of a year ago, immediately before the COVID crisis.
Overall, there was little change in the global confidence measure in Q4. But there was a marked divergence regionally.
Confidence fell back in North America, having surged in the previous quarter, by contrast, there was a big improvement in Middle East confidence, probably buoyed by continued recovery in oil prices.
Moreover, according to the survey giving detailed consideration of the year ahead. The global economy is in a fragile state at the start of 2021.
This is due to the significant increase in COVID infection rates towards the end of 2020 in many countries, boosted by a new, more easily transmissible variant of the virus. National lockdowns have been introduced in many countries with immediate adverse economic consequences.
More positively, the approval and rollout of several vaccines offering a high degree of immunity raises hopes of a more permanent resolution of the COVID crisis later this year.
However, there is great uncertainty about the path of economic growth this year, much of it due to risks surrounding evolution of the virus and the speed and effectiveness of vaccination rollouts. But there are economic factors too, notably rising unemployment rates.
Much unemployment has been hidden by generous wage subsidy or furlough schemes that supported employment even as economic activity collapsed last year. Once these schemes are withdrawn, there will be an inevitable jump in unemployment rates.
The scale of this may be sufficient to undermine consumer confidence and spending, limiting the pace of recovery.
However, it should be noted that polling for the survey was completed by 8 December 2020. Since then, many countries have suffered increased COVID-19 infection rates, prompting governments to re-impose restrictions including national lockdowns.
Hence global economic prospects early in 2021 will have deteriorated since the Q4 survey was conducted. At the same time there has been progress on the approval of vaccines, raising hopes of a permanent improvement in economic conditions later this year.