Heavily indebted developing countries (the case of Brazil), particularly commodity exporters, face exceptional threat from the coronavirus pandemic

The coronavirus pandemic will cause a collapse in the Chinese economy that will therefore directly affect other countries. The consequences generated by covid-19 on the global economy have not yet been measured, but the world is already beginning to feel the enormous crisis. Petrobras asks banks to disburse US$8 billion to reinforce liquidity amid the coronavirus crisis

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The industrial area, the retail market and investments in fixed assets, are the ones that have been most impacted by the new coronavirus, but according to the National Bureau of Statistics of China, the worst is yet to come, the damage caused by covid-19 will increase fears of a global recession.

The pandemic migrated to Europe, where Spain and Italy are the countries that have been suffering the most from the outbreak. Until March 20, 80 people were infected and more than 6 died in both countries. From Saturday to Sunday alone, almost 800 people died in Italy, where the most people died in the world, 4.825.

In China, industrial production suffered a strong impact year-on-year, falling 13,5%, the first contraction since January 1990. Analysts had expected a 3% decline in this indicator.

The retail market, considered the second largest economy in the world, suffered a sharp drop of 20,5% compared to the previous year, the biggest decline in the historical series. The market was talking about a 4% drop.

Expenditure on items that include infrastructure, property, machinery and equipment considered fixed assets registered a whopping 24,5% drop, six times more than analysts had predicted.

The numbers show the consequences generated in the Chinese economy amid the new coronavirus, where China had to take tough measures such as closing factories and stores across the country for several weeks, in order to contain the spread of the virus in its territory.

China has been gradually resuming its industrial activities, until March 16 the Chinese economy operated with 69,5% of its production, but the crisis caused by the coronavirus clearly shows economists that both sides of the economy, the supply chain and demand are strongly affected by covid-19

“The restrictions on industrial activity have been resolved for the most part. The big concern now for companies is weak demand,” said the consultancy.

China now represents a third of world manufacturing, being the largest exporter of goods on the planet - what happens in the Asian country will have a global impact.

The damage caused by the coronavirus poses the “biggest threat to the global economy since the 2008 financial crisis”. Earlier this month, the United Nations Conference on Trade and Development (UNCTAD) predicted that the pandemic could cost the global economy as much as $2 trillion this year.

The impact of covid-19 on the Brazilian economy

“Heavily indebted developing countries (the case of Brazil), particularly commodity exporters, face an exceptional threat,” due to lower export returns pegged to a stronger dollar, warned Richard Kozul-Wright, director of UNCTAD’s division of globalization and development strategies.

Since the beginning of the year, analyzes of the consequences generated by the coronavirus on the Brazilian economy have shown an increasingly negative scenario.

In February, the government predicted an impact of around 1 percentage point on the expected growth of around 2% of GDP. Last Friday (20), the country's economic team cut its official projection from 2,1% to 0,02%.

According to analysts and researchers, Brazil may experience an economic crisis on a scale compared to the one faced in 2008 and the truck drivers' strike in 2018.

The Brazilian GDP may retreat 4,4% in 2020, according to studies by Foundation Getulio Vargas. Banco Itaú estimates that if the Brazilian economy suffers a stoppage as it did in China during the quarantines imposed, GDP could fall by 0,7% this year.