WASHINGTON, June 2 (.) – The coronavirus and resulting recessions will leave “lasting scars” in developing countries and emerging markets, with oil-exporting nations and those suffering from financial crises taking the brunt of it, it said Tuesday on Tuesday. World Bank.
In its global economic outlook report, the bank argued that an average emerging market country suffering from a financial crisis could see an 8% drop in output over a five-year period, while in the case of exporters of oil the collapse would reach 11%.
Officials from the international lender stressed that growth prospects had already dimmed significantly due in part to trade conflicts, so the impact of the pandemic could easily turn into solvency problems for emerging market countries.
Low interest rates in the past decade contributed to a record rise in sovereign and corporate debt in emerging markets, limiting the authorities’ ability to respond to the crisis and avoid business closings, job losses, and deterioration of human capital, said Ceyla Pazarbasioglu, vice president of equitable growth, finance and institutions of the bank.
“If the policies are fully geared towards supporting vested interests or zombie companies, it can create liquidity problems that turn into solvency problems,” said Pazarbasioglu.
“What is really needed now is urgent measures to limit damages, but also to stay out of policies that can lead to this health crisis, which has turned into an economic crisis, a financial crisis.”
(Information from David Lawder. Edited in Spanish by Javier Leira and Rodrigo Charme)