Question

In: Finance

How will COVID 19 effect Brazil, Russia, India and China? Also, what measures can they take...

How will COVID 19 effect Brazil, Russia, India and China?

Also, what measures can they take to improve the current situation and look to financial stability?

Solutions

Expert Solution

The effects are manifold, and can converge together to have significant negative impact on the economy of any country, more so a developing country's like BRIC members'.

First impact is on productivity (in regions not under lockdown yet) because of psychological impact of an epidemic, second is of available labour because of complete lockdowns imposed in many areas as well as imapired movements of migratory labour especially as nations like India and China are heavily dependent on migratory labour with growth concentrated in pockets.

Industries altogether shutdown, sharp drop in demand for non-essential goods, increasing insolvencies and unemployment. For ex. India has imposed complete lockdown of the whole country for 21 days as precaution, and China had picked up similar measures for certain pockets.

Mobility of international travelers get impacted, which include consultants necessary for transfer of technical know-hows for some critical projects.

Altogether, a significant hit would be observed in terms of GDP, with further pressure from inadequate healthcare expenditure per capita vs. developed nations, which will have to be shored up to tackle Covid 19.

Step that can be taken to bear the economical shock would have to be both fiscal (increased budget expenditure in th form of targeted stimulus packages) and monetary (rate cuts, bond-buying to encourage financing activity). A key focus would also be to shield financial institutions from sudden onslaught of increased impaired loans due to rise in unemployment and insolvencies; this can be done throuse easing norms for impairment recognition and easing capital norms like relaxing capital buffer reuirements.


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