Five points on the latest EM coronavirus numbers - Capital Economics
Emerging Markets Economics

Five points on the latest EM coronavirus numbers

Emerging Markets Economics Update
Written by William Jackson

Emerging markets account for the majority of new global coronavirus cases each day (see Chart 1) and, while containment measures may be tightened sporadically, these are generally likely to be targeted and localised. The spread of the virus is, of course, extremely unpredictable. But the risk of prolonged severe lockdowns similar to those seen in March and April – which would cause much greater economic damage – generally seems to be concentrated in parts of Latin America.

  • Emerging markets account for the majority of new global coronavirus cases each day (see Chart 1) and, while containment measures may be tightened sporadically, these are generally likely to be targeted and localised. The spread of the virus is, of course, extremely unpredictable. But the risk of prolonged severe lockdowns similar to those seen in March and April – which would cause much greater economic damage – generally seems to be concentrated in parts of Latin America.
  • There are five key points to highlight about the recent coronavirus developments in the emerging world. First, low levels of testing make it hard to gauge the true extent of outbreaks in some place. While some countries have widespread testing (e.g. in Russia and Saudi Arabia, testing per capita is similar to that in the UK or the US), in others it is much lower. (See Chart 2.) In the case of Korea (and some others) this reflects the fact that there had been very high testing previously and case numbers are now low. But in other countries (notably parts of Sub-Saharan Africa and Mexico) testing has always been low.
  • And the statistics may be compiled in different ways. In Mexico, for example, the authorities compensate for low testing by estimating the number of new cases based on positive tests, which is scaled up based on samples of people showing symptoms at health centres (but aren’t tested) – a so-called sentinel model.
  • Second, there is clearly a wide divergence in the extent of coronavirus outbreaks in EMs. To illustrate this, Charts 3 and 4 show the latest daily new cases per million population on the horizontal axis and the change in that number since the end of July on the vertical axis (so a positive number means that new cases are on an upwards trend, a negative number means a downwards trend). (3 & 4)
  • Large outbreaks remain concentrated in Latin America. Brazil’s case numbers have started to plateau (at a high level), as have Mexico’s (at a lower level), while an earlier lockdown in Chile has brought new coronavirus cases down significantly. But cases are rising in Argentina and, to a greater extent, Colombia.
  • Elsewhere, case numbers are relatively high in South Africa (although they have fallen sharply recently), Romania, India and the Philippines. Case numbers are very low but rising in a few places in Asia, including Thailand and Korea. The number of new cases in China is – despite a few high-profile outbreaks – extremely low (both in absolute terms and relative to the size of its population).
  • Third, while the number of new cases in EMs has been high, the coronavirus hasn’t been as deadly as it has been in DMs. There was never a spike in coronavirus-related deaths in March and April. (See Chart 5.) Again, measurement issues may be affecting the picture. The cause of deaths may be incorrectly recorded (or not recorded at all). Measures of ‘excess deaths’ (the difference between the number of recorded deaths this year and previous years) suggest that coronavirus-related fatalities may be under-recorded.
  • However, that probably can’t explain all the gap with developed markets. Emerging markets have also probably benefitted from the fact that populations are generally younger than in developed markets, reducing the prevalence of severe coronavirus cases. And those EMs with older populations (mainly in East Asia and Eastern Europe) brought the virus under control quickly.
  • Fourth, if there is a surge in new virus cases, most countries would opt to use strict, targeted and localised measures. Many governments (in East Asia and Eastern Europe) demonstrated their ability to control first waves and are now better equipped to deal with second waves. What’s more, the risk of new cases over-burdening the health system is lower. Hospitals are better resourced, treatment has improved, and to the extent that rises in new cases reflect a previous opening up of economies (workplaces, restaurants, etc.), coronavirus cases are more likely to be concentrated among younger people.
  • Several Asian economies (Singapore, China, Korea, Hong Kong and Vietnam) have gone down this route. There would be disruptions to output (see here) and possible changes in household behaviour – as now seems to be happening in Korea. But these effects would probably be temporary and limited.
  • Finally, in some other EMs, mostly those which are yet to handle their first waves, the situation is more precarious and health systems are at risk of being overburdened. Coronavirus-related death rates are high in parts of Latin America (most notably Colombia) and, to a lesser extent, South Africa and Romania, suggesting health systems are most vulnerable in these countries. These countries have generally maintained strict lockdowns and will probably continue to do so. (See Charts 7 & 8.) That has gone hand in hand with much weaker economic recoveries. (See our latest EM Activity Monitor.)

Chart 1: Number of Daily New Coronavirus Cases
(Thsd. 7d Avg.)

Chart 2: No. of Tests per 1,000 People (7d Avg., Latest)

Chart 3: No. of New Daily Cases per Mn. (7d Avg.)Chart 4: No. of New Daily Cases per Mn. (7d Avg.)

Chart 5: No. of Daily Coronavirus Deaths per Mn.

Chart 6: No. of Daily Coronavirus Deaths per Mn.
(7d Avg., Latest)

Chart 7: Government Response Stringency Index

Chart 8: Government Response Stringency Index

 

Sources: Oxford University, Our World in Data, Capital Economics


William Jackson, Chief Emerging Markets Economist, william.jackson@capitaleconomics.com