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Emerging Markets: Rebuilding Economies

As the COVID-19 pandemic enters a second year, concerns are rising about how well-emerging markets will fare. In a global recovery in which some countries are rebounding faster than others and uncertainty are high regarding the pandemic, there is likely to be more market volatility. The global economy is projected to grow 6.0 percent in 2021 and 4.9 percent in 2022. The 2021 global forecast is unchanged from the April 2021 WEO, but with offsetting revisions.

Prospects for emerging markets and developing economies have been marked down for 2021, especially for Emerging Asia. By contrast, the forecast for advanced economies is revised up. These revisions reflect pandemic developments and changes in policy support. The 0.5 percentage-point upgrade for 2022 derives largely from the forecast upgrade for advanced economies, particularly the United States, reflecting the anticipated legislation of additional fiscal support in the second half of 2021 and improved health metrics more broadly across the group.

Now, on the other hand, in emerging markets and developing economies, most measures expired last year, and they are looking to rebuild fiscal buffers. Some emerging markets, like Brazil, Hungary, Mexico, Russia, and Turkey, have also begun raising monetary policy rate to head off upward price pressures.

What does this mean for Food Exporters?

Inflation is expected to remain elevated next year, in some emerging markets and developing economies, related, in part, to continued food price pressures and currency depreciations that are creating yet another divide. What does this mean for the food exports in the emerging markets? As an example, Argentina has benefitted from a surprising increase in its export prices as we have seen food prices go up internationally. That positive effect coming through the push is getting through export prices is helping with Argentina’s recovery. To put the number on that, expecting growth this year is to be 6.4 and to moderate to about 2.4 in 2022. 

According to World Economic Outlook research on Managing Divergent Recoveries; Income is the most important driver of food (in)security in low-income countries and some emerging markets. The COVID-19 pandemic, therefore, risks delaying the process of bringing the number of undernourished people to zero by 2030. Governments should thus strengthen safety nets for the most vulnerable and mitigate the risk of food price spikes by guaranteeing the smooth functioning of food supply chains.

Smaller food producers should exploit international food markets to smooth the impact of domestic production shocks on local food prices. This is particularly relevant as climate change is increasing the volatility of those shocks. International food markets should be kept open and food exporters should avoid export restrictions that exacerbate the global price impact of food production shocks and undermine confidence in international food markets. Finally, given that trade is not a hedge against global food supply shocks, governments must take alternative measures that stimulate sufficient strategic food reserves at the regional level and encourage the development and adoption of more
climate-resilient crops and production methods.

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