NEW DELHI: The economic fallout from the Covid-19 shock is ongoing and increasingly difficult to predict but there are clear indications that things will get much worse for developing economies before they get better, a new report has said.
The report by the United Nations Conference on Trade and Development (UNCTAD) projected that developing countries as a whole (excluding China) will lose nearly $800 billion in terms of export revenue in 2020.
"The financial turmoil from this crisis has already triggered sharp currency devaluations in developing countries, which makes servicing their debts and paying for necessary imports for their industrial activity far more onerous," according to the report titled 'The Covid-19 Shock to Developing Countries'.
Many developing countries were slowing down in the final quarter of last year with several entering recession. However, the speed at which the economic shock to advanced economies has hit developing countries - in many cases in advance of the health pandemic -- is dramatic, even in comparison to the 2008 global financial crisis, said the report.
New vulnerabilities have emerged that are likely to hold back growth. Emerging economies, in particular, have seen a rapid build-up of private debt in reserve currencies and increased penetration of their markets by non-resident investors, foreign banks, and other financial institutions, as well as allowing their own residents to invest more freely abroad.
Developing countries' ability to build up international reserves as a buffer against macroeconomic shocks has been weakening. The report listed three main transmission mechanisms or channels through which the Covid-19 shock can be expected to increase financial pressures on developing economies over the coming months.