COVID-19: emerging market stimulus poses challenge to growth

Emerging market governments are countering recessions caused by COVID-19 with fiscal and monetary stimulus, but it may impact their long-term growth unless they can lift productivity through investment.

Key takeaways

  • Governments in emerging markets are rolling out stimulus packages in response to COVID-19.
  • Emerging markets continue to be most attractive for long-term growth potential in our view.
  • Fast-rising fiscal spending is increasing government debt leverage, estimated to reach 65% in 2021 from 53% in 2019.
  • Unconventional monetary policy has been launched by 13 central banks and we expect more to follow suit.
  • Emerging markets are vulnerable to a spike in risk premia if credit and liquidity conditions worsen.
  • More investment in infrastructure is needed for sustaining long-term economic growth.

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Economic Insights COVID-19: emerging market stimulus poses challenge to growth

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