Some of the world’s largest developing economies are set to face a fiscal crisis in the coming years unless they can roll back huge increases in public spending enacted in response to the Covid-19 pandemic, analysts have warned.
The economic downturn caused by the pandemic, combined with rising healthcare spending to tackle the spread of the virus, have caused budget deficits to soar in many countries. They will have to face the choice of risking public unrest by cutting back on spending, or negotiating with investors to restructure their debts.
On average, emerging and developing economies have announced support packages worth 5.4 per cent of gross domestic product according to figures published by the World Bank last month; in some countries — including India, Malaysia, Poland, Qatar, South Africa and Thailand — pandemic-related public spending has topped 10 per cent of GDP.