The great leap backwards in emerging countries

For Ford, the Indian market will have been a mirage. The American automaker announced on September 9 that it was withdrawing from the country after accumulating more than $ 2 billion in losses (nearly 1.7 billion euros) over the past ten years. A painful and unexpected end to the road for a company which, until a few years ago, saw the Asian giant and its 1.3 billion inhabitants as one of the most promising automotive markets on the planet.

In 2020, Harley-Davidson left the country, preceded by General Motors in 2017. “That large companies like Ford, which invest for the long term, to withdraw from an emerging country like India is worrying, explains Rebecca Ray, researcher at the Global Development Policy Center at the American University of Boston. MEven if their slowdown had already started a decade ago, the Covid-19 crisis is exacerbating this trend. “

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The crisis shattered the concept of “emerging” popularized in the 2000s by investment banks and consulting firms to designate developing countries with rapid growth, and in full integration into the world economy. However, since 2020, all except China have fallen from their peaks with sometimes violent stalls, like India and Mexico, which have experienced respective recessions of 8.7% and 9.1% l last year.

Widened gaps

Judging by their growth rate, emerging countries no longer form a homogeneous group as the gaps widened in 2020, both in the same region, for example between the Philippines (where GDP fell by 9.5% ) and Vietnam (with a GDP up 2.9%), or between continents. The recession was contained in Asia (the economy shrank by 1.5%), but marked in South America (- 6.6%). While growth in Africa was higher than the rest of the world before the pandemic (3.6% against 2.7% in 2019), it has fallen behind the global average since the start of the pandemic.

During the crisis, other loopholes opened up. “As the use of telemedicine explodes in China and Indonesia, Laos and Cambodia are suffering from electricity shortages,” notes Federico Bonaglia, Deputy Director of the Development Center of the Organization for Economic Co-operation and Development (OECD).

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The middle class, another indicator of development in emerging countries, has also shrunk with millions of families falling below the poverty line. In a report published in 2020, the World Bank shows that middle-income countries total 80% of the 100 to 150 million inhabitants who have fallen into extreme poverty because of the Covid-19 crisis. Southeast Asia the most affected region, followed by sub-Saharan Africa. These new poor with different profiles are mostly employed in the informal sector, in manufacturing or in construction, and live in cities.

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