Emerging markets need to extend their financing and social policy support amid the slowdown in vaccine roll out amid the ongoing COVID-19 crisis, according to Moody’s.
In its insights published on Monday, Moody’s expected that vaccination levels in G-20 emerging market countries to reach 70 percent by the end of 2022, while it could take until the end of 2023 in some low-income economies.
“The lag in vaccination rates leaves emerging markets exposed to the risk of new virus variants and new waves of infections. Emerging markets will also be exposed to the risk of tightening global financial market conditions,” Moody’s noted on the ongoing impacts of the pandemic on such markets.
On monetary policy, Moody's expected central banks in emerging markets to keep interest rates low and financial conditions supportive for domestic issuers, in case they have low inflationary pressures and a low dependence on foreign capital.
Policy support in emerging market economies will be imperative for longer than in advanced economies, especially that such markets provided smaller and less comprehensive support packages because of their more limited fiscal spaces, according to Moody's.
“Given the progress with COVID-19 vaccinations and rebound in economic activity in most of the G-20 advanced economies this year, the risks related to a withdrawal of policy support are much lower now than they were a year ago. As advanced economies gain strength, we expect policy support will be unwound gradually and only as business conditions and labour markets improve,” Moody’s explained.
During the first quarter (1Q) of 2021, roughly all emerging markets performed worse than they did in the fourth quarter of 2020 due to the ongoing COVID-19 crisis, as according to Fitch Solutions.
In its recent report on emerging markets' performance amid the pandemic — shared with Ahram Online — Fitch Solutions said that emerging markets are expected to perform better later in 2021.
Capital inflows headed to emerging markets are witnessing an increase — up till May — exceeding $40 billion, while most currencies will weaken going forward, European currencies are expected to strengthen, according to the report.