A rosier post-pandemic economic outlook for advanced economies is supported by the faster pace of vaccines being rolled out compared to developing countries, as well as stronger proactive fiscal responses being deployed now and in the future. But why aren't developing and emerging economies opening their purses enough to shore up their economies, despite suffering from the economic impact of the pandemic no less than their advanced peers? Developing countries are facing severe economic damage due to the sheer size of informal economies with vulnerable, low-income workers who cannot enjoy the luxury of work from home arrangements, and face poor hygiene and healthcare conditions.
While advanced economies recorded large increases in fiscal deficits in 2020, developing countries' fiscal responses have been much more limited. As per the Institute of International Finance, the global debt to GDP ratio by government rose to 105.4% by Q4, 2020 from 88.3% in 2019. The ratio for emerging markets grew to 63.5% from 52.4% during this period.- blog.adb.org/blogs
A version of this article appears in the print on August 4, 2022 of The Himalayan Times.
