By many accounts, the global economy heading into 2020 was flush with pockets of optimism around the world. Markets that generally have struggled to find long-term stability and prosperity were seen as being on the verge of turning a corner with many businesses eying them for international expansion opportunities. Such plans can be years in the making, having accounted for a number of potential issues that could derail such as significant investment.

What virtually no organization could have predicted is the COVID-19 crisis. Certainly, the possibility of a global pandemic wasn’t implausible, but by nature, “act of God” events are unpredictable.

In a few short months, the COVID-19 pandemic has significantly impacted the global economy – with the trajectory of many emerging markets now heading in a decidedly different direction. For example, Thailand’s economy now “is forecast by the central bank to contract the most since the 1990s,” according to Bloomberg.

The Congressional Research Service (CRS) estimates global economic growth could fall by 2% per month based on current conditions. Further, global trade could decrease anywhere between 13% and 32%. These forecasts are devastating for all markets throughout the world, but for those already struggling to gain a foothold  before the global economic crisis, they’re especially distressing.

What are some factors impacting emerging markets during the COVID-19 pandemic?

Less demand for goods and services

The principles of supply and demand are painfully displayed within these global market insights. Throughout the world, people are working less, which in turn, means they are purchasing fewer goods and services. Such a widespread drop in demand has halted production– the engine behind a country’s gross domestic product (GDP) – in countless markets. The drop in production was so severe that the cost of oil across the world fell below $0.00 in mid-April.

The same CRS report references a World Trade Organization (WTO) forecast that estimates global trade volumes will fall by double-digit percentages this year for every continent, even in the best-case scenarios. Such a decline could put many emerging markets on the verge of collapse.

Poor health infrastructure in developing countries

One of the biggest concerns throughout the United States regarding the coronavirus has been the strain it has put on the nation’s health care system. Those concerns are exponentially more severe in nations with less sophisticated health care systems in place. According to the World Bank, Madagascar and Ethiopia only have 20 and 30 hospital beds, respectively, per 100,000 residents. On top of that, living and working conditions in many emerging markets do not allow for the social distancing protocols that are needed to effectively flatten the curve in slowing the spread of COVID-19.

Increased travel, trade and immigration restrictions

Already, nations, including the United States, have imposed restrictions around travel, trade and immigration. The New York Times recently reported that “at least 93% of the global population now lives in countries with coronavirus-related travel restrictions.” While these measures help protect citizens from the disease and limit the coronavirus’ spread, they also make many fundamental aspects of international business in emerging markets incredibly difficult, if not altogether impossible.

Ballooning debt fueling default concerns

For the past decade, new markets have been quite popular among foreign investors. So much so, that collectively, emerging markets owe $8.4 trillion. As Bloomberg notes, that’s almost a third of the developing world’s GDP.

This capital has been instrumental for these countries to strengthen their economies, develop infrastructure and purchase assets critical for long-term success. However, like all debt, there needs to be enough incoming revenue to pay down this debt – or at least keep it at a manageable level. With the global economy contracting as it is, many countries are finding themselves facing the very real prospect of defaulting on these debts.

Do you have a continuity plan in place to help maintain and resume your operations in emerging markets once the pandemic concludes?

Many businesses already have made investments in emerging markets with established operations there. As dire as the current situation may seem, conditions eventually will improve, allowing for these markets to potentially rebound. Through all of this, it’s important to have a continuity plan in place to ensure operations can continue, when possible, and to outline what steps should be taken to resume normal activities.

For those organizations that already have a continuity plan in place, it’s also necessary to re-evaluate it and determine if any changes need to be made given what’s transpired across the globe in recent months. By nature, these plans should account for a wide range of scenarios and variables. However, the pandemic has had an unprecedented impact on countless aspects of our professional and personal lives, and even the most comprehensive plan may now be outdated in some regards.

It cannot be stressed enough that the COVID-19 global economic crisis remains a highly fluid situation. Organizations with existing or planned international operations will need to closely monitor the pandemic and adjust their plans accordingly. Hilldrup will continue to share resources and information around adapting to life during and post COVID-19.

If you need help reassessing your company’s international relocation plans in the midst of the COVID-19 pandemic, we can help. Hilldrup specializes in assisting organizations navigating the many nuances associated with international relocation.

John Warlick Author