COVID-19 Recovery in Developing Economies

The onset of the COVID-19 pandemic made an immediate impact on the economy. The United States was shocked overnight, entering an extremely deep recession. Immediately after the lows of March and April 2020, the United States entered economic recovery. In the following twenty months, we have seen government intervention and stimulus, vaccine development and distribution, and a return to a somewhat normal way of life. This success, however, is not the case for many developing nations, where COVID-19 continues to rage and economies continue to suffer as a result. As the United States continues to see economic growth, eventually returning to normalcy, it makes us ask how developing economies abroad will recover and respond in the years to come.

Leading up to the availability of vaccines, upper and upper-middle income countries had a larger share of total mortality than lower and lower-middle income countries. Upon vaccine availability in 2021, there was a major shift in the distribution: high income countries' share of mortality dropped from 59 to 15 percent. Lower-middle income countries’ share of mortality rose from 7 to 42 percent (Gill & Schellekens 2021). Rather than equalizing, the trends reversed. Without access to vaccines, the pandemic continued in developing nations, and in some cases, got worse. These mortality shares for lower-middle income countries are only expected to rise in the future— estimates are as high as 86%. As high income countries continue to progress beyond the pandemic, it will surely linger in the developing world. 

The implications of a lingering pandemic are clear. Both emerging economies and low-income countries are left far behind advanced economies. World Bank projections through 2022 show advanced economies nearly returning to pre-pandemic output, yet low-income countries will have a flat growth rate nearly 5% below pre-pandemic output. Emerging-market and developing economies will also have a flat growth rate 4.1% below pre-pandemic output (World Bank 2021). 

India, an emerging economy, was experiencing strong economic growth leading up to the pandemic. Throughout 2020, their economy shrank dramatically. Despite a recent second-wave, they have still seen significant economic growth: “Gross domestic product grew by 20.1% for the April to June quarter compared to a year earlier.” (“India Covid: Economy sees record growth during deadly wave” 2021). Poverty levels in India are also expected to fall below the 2019 rates this year (Kharas & Dooley 2021). Much of this growth can be attributed to private investment, consumer spending, manufacturing, and construction. Additionally, India has had stimulus measures in place throughout the pandemic. 

Low-income countries, specifically those in Sub-Saharan Africa, will have different long-term outcomes. Countries “like Nigeria and the Democratic Republic of the Congo, will likely be slow to recover, and could experience low growth for the next decade. As a result, they may see higher poverty headcounts in 2030 than in 2019.” (Kharas and Dooley 2021). The economic effects of COVID will certainly outlast the pandemic itself in low-income countries. Their  outcome is much worse than developing economies that have the resources and momentum to return to pre-pandemic economic growth. 

In the long run, the pandemic will continue to impact these nations, but government response surrounding vaccination and social welfare will be critical in determining the magnitude. 

Already, we have seen the positive impact of vaccination in high income countries. In high-income countries, “1 in 4 people have been vaccinated, a ratio that drops precipitously to 1 in 500 in poorer countries” (United Nations Economic and Social Council 2021). Initiatives, like COVAX, have been created by a partnership of organizations to coordinate vaccination efforts in the developing world. The effectiveness of this initiative, however, will not meet the needs of these nations. COVAX is expected to fall short of its goals for 2021 (“Why a pioneering plan to distribute COVID vaccines equitably must succeed” 2021).  Economic recovery is dependent on high vaccination rates, and without the necessary infrastructure to develop and distribute vaccines of their own, the developing world is left waiting for vaccines from high-income countries. Instead, it is likely that COVID will remain in these nations, continuing to put a damper on economic growth.

Although many social protection programs have been created since March of 2020, many of them are temporary and only at the national level. In order to see aid distributed where it is most needed, “aid targeting will likewise need to move from the national level to the subnational level.” (Kharas & Dooley, 2021). In developing economies, poverty is concentrated in hard to reach places. National programs overlook smaller pockets of poverty, but aid must meet the individual community’s needs. Aid programs coming out of COVID-19 will hopefully continue and grow in the future, focusing on more than recovering from the pandemic itself. 

The HIV/AIDS epidemic provides insight into the long term implications of COVID-19. Although now a small worry in the United States, AIDS remains very prevalent in developing countries, affecting long-term development. Today, two thirds of people living with HIV/AIDS are in Africa and the Caribbean (Center for Global Development 2004). This puts a strain on their already low-budget health care systems, holding back government investment in other sectors, too. For the hardest hit countries, AIDS is likely to reduce national income by as much as 20% by 2020 (Center for Global Development 2004). The epidemic remains a fact of life in developing nations. A primary reason for this includes the lack of infrastructure for distributing low-cost treatment, a barrier developing countries also face for COVID-19 vaccination. COVID vaccination will require the same tools as HIV/AIDS to be eradicated in the developing world. Based on the lingering epidemic many years later, without significant investment, it can be expected that COVID-19, too, will linger, further hindering economic development. 

The impact of COVID-19 still remains uncertain, but it is clear that the entire developing world will not recover in the same way as the United States and similar economically advanced countries. Hopefully, the pandemic will inspire responsible, targeted investment in developing countries, which will provide a way to sustain long-term economic growth. Social welfare programs and public health initiatives instituted during the pandemic will hopefully continue, expand, and improve, addressing extreme poverty exacerbated since March of 2020. 

The most important goal for the United States should be to not leave behind a significant portion of the world. As advanced economies progress past the pandemic, we should be responsible for ensuring eradication of the virus everywhere. Until eradication, the pandemic will remain in our rearview mirror, not only haunting our consciences, but also hindering economic performance worldwide.

References

Center for Global Development. “Global HIV/AIDS and the Developing World.” Washington, DC: Center for Global Development, 2004. https://www.cgdev.org/sites/default/files/2851_file_GLOBAL_HIV_AIDS1_0.pdf

“Global Economic Prospects: The Global Economy: On Track for Strong but Uneven Growth as Covid-19 Still Weighs.” World Bank, June 18, 2021. https://www.worldbank.org/en/news/feature/2021/06/08/the-global-economy-on-track-for-strong-but-uneven-growth-as-covid-19-still-weighs. 

Homi Kharas, Megan Dooley. “Extreme Poverty in the time of COVID-19.” Washington, DC: Brookings Institution, June 2021. https://www.brookings.edu/wp-content/uploads/2021/06/Extreme-poverty-during-the-time-of-COVID-19.pdf

Indermit Gill, Philip Schellekens. “COVID-19 is a Developing Country Pandemic.” Washington, DC: Brookings Institution, May 27, 2021. https://www.brookings.edu/blog/future-development/2021/05/27/covid-19-is-a-developing-country-pandemic/

“India Covid: Economy sees record growth during deadly wave.” BBC, September 1, 2021. https://www.bbc.com/news/business-58390291

United Nations Economic and Social Council, “Unequal Vaccine Distribution Self-Defeating, World Health Organization Chief Tells Economic and Social Council’s Special Ministerial Meeting,” press release, April 16, 2021.

“Why a pioneering plan to distribute COVID vaccines equitably must succeed.” Nature, January 13, 2021. https://www.nature.com/articles/d41586-021-00044-9

Annie Volker

Issue IV Fall 2021: Staff Writer

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