Authors: Adam Tooze
Affiliation: Foreign Policy
Organization /Publisher: Foreign Policy
Date/Place: March 28, 2020/U.S.
Type of Literature: Analysis
Word Count: 3622
Link: https://foreignpolicy.com/2020/03/28/coronavirus-biggest-emerging-markets-crisis-ever/
Keywords: Coronavirus, Economic, Crisis.
Brief:
In this article, author and history professor Adam Tooze (European Institute, Colombia University) talks about the current economic crisis that the world is experiencing as a result of the Coronavirus pandemic which has struck the largest economic countries in the world. Starting with China, then Europe and North America, local and global financial markets are subject to great turmoil, along with the health crisis that accompanies it and threatens the lives of the population. Because emerging markets constitute more than 44% of S&P 500 sales outside of the US, attacks against foreign currencies, where the financial crisis is spreading before the virus has even arrived, have a global effect. The author identifies specific countries whose economies are at risk, such as South Africa, Brazil, Chile, Thailand, and even Turkey, where the exchange rate of its currency has decreased along with the debt crisis of its banks. The crisis casts a shadow on the technology industry as well. In the opinion of the author, the biggest shock that the market faced was the stopping of talks between Russia and Saudi Arabia over oil; since then the relentless supply by the main producers has driven prices down. The author goes back to the 2008 global financial crisis and discusses ensuing crises the world has witnessed until today, finishing his article by asking the important question: in a world riding out a massive, simultaneous shock, what is the point of strength on which emerging markets should anchor themselves? One potential stabilizer for the global economy is China, whose currency has remained stable due to backing by the People’s Bank of China that shields its financial system. It is yet to be seen whether China, which is exiting the economic crisis sooner than other nations, is able to manage its debt while expanding its regional hegemony by lending to the hardest-hit nations, or if it will be stuck dealing with its own global debt crisis. The author concludes that it is unrealistic to expect China to pull the world economy out of recession.
By: Taqwa Abu Kmeil, CIGA Research Assistant
