Can the Pandemic Push Countries towards Convergence?
Given the current conditions of COVID-19, one wonders what can benefit the Pandemic Push Countries towards Convergence? Economic convergence is defined as a phenomenon when developing countries grow faster than rich ones, consequently narrowing the income gap.
Economists worldwide are debating on the future of convergence. Some believe that the slowing down of advanced economies (faster than the developing economies) will decrease the two’s income gap. In contrast, others warn of dire consequences for the emerging markets.
20th Century and Economics:
By the last decade of the 20th century, many developing countries began to grow faster than advanced nations in per capita income. During 1990 – 2007, the annual growth per capita for developing countries averaged about 2.5% higher than the advanced economies.
Four of the emerging markets Brazil, Russia, India, China and South Africa (collectively called BRICS), showed remarkable economic progress. Together, these countries embody 42% of the world population, 30% of the territory trade, 18% of the global trade, and 23% of the world GDP.
There has been a significant downturn in investment, trade and tourism.
However, due to the COVID-19 pandemic, emerging economies are also suffering from an unexpected slowdown. The graph shown in this article portrays a promising image for the developing world as a whole. Still, it’s not representative of many poorer countries individually.
Economics May Not Work the Same Way Post-COVID:
The pandemic proved to be a crisis like no other. As the virus spread worldwide, an estimated $100 billion of foreign capital was withdrawn from Asia’s emerging and developing markets only in the first few months. According to economists, some developing nations, such as Argentina and Ecuador, are proving to be more vulnerable.
The above article indicates that convergence is far from possible. The countries that are hit hard due to the global economic slowdown and travel restrictions might lose a decade of economic growth instead of 1-2 years by the advanced economies. However, there is light at the end of the tunnel for every economy willing to put in enough efforts.
Written by Neelma Faraz
Managed and Edited by Javeria Qadeer