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COVID-19

This crisis is hard on us. It’s even harder on countries that aren’t rich.

Sabri Ben-Achour May 21, 2020
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A family walks down the street in Sao Paulo, Brazil. The value of that nation's currency, the real, has plummeted. Rodrigo Paiva/Getty Images
COVID-19

This crisis is hard on us. It’s even harder on countries that aren’t rich.

Sabri Ben-Achour May 21, 2020
Heard on:
A family walks down the street in Sao Paulo, Brazil. The value of that nation's currency, the real, has plummeted. Rodrigo Paiva/Getty Images
HTML EMBED:
COPY

The United States government has a lot of tools in its toolbox designed to help prop the economy up through the coronavirus crisis. That includes trillions of dollars in payments to individuals, expanded unemployment benefits and forgivable loans to businesses. And the Federal Reserve has its own tools — buying up bonds and backing even more loans.

The U.S. can do all of that because it’s a rich country. But countries that aren’t rich don’t have those tools at their disposal. So their debts are piling up, and they’re struggling.

You know what money does when it’s in danger? It runs. 

“We saw a dramatic, almost unprecedented retrenchment of capital that left emerging markets,” said Andrew Karolyi, professor of finance at Cornell.

Investment money has been surging out of emerging markets — developing and middle-income countries. Karolyi said in two and a half months, four times as much money left emerging markets as did in the Great Recession.  

“It’s something I haven’t seen in my 30 years of watching this,” Karolyi said.

When people take their money out of a country, its currency falls in value. That means it won’t go as far, which is a problem if the country is in serious debt — like almost half of developing countries are.

“This creates essentially a pandemic Catch-22 for these developing countries,” said Stephen Kaplan, associate professor of political science at George Washington University. “Do you pay off the debt, or do you increase your spending on all kinds of essential items?”

Essential items like fighting a pandemic. And this is exactly what’s happening. 

“Pretty much every emerging-market currency is down year to date,” said Win Thin, global head of currency strategy at Brown Brothers Harriman. “The worst is Brazilian real, down almost 30%, South African rand is down 20%, Mexican peso down 18% year to date.”

This hasn’t gone unnoticed. The International Monetary Fund canceled 6 months of debt payments for the 25 poorest countries, and the G-20 nations agreed to put debt on hold for others. Eric LeCompte, president of Jubilee USA — a group of religious organizations that promotes debt relief — said that’s not enough. 

“The United Nations now predicts that 40 to 60 million people will move into extreme poverty because of the crisis,” LeCompte said. 

One hundred and ten countries are asking the IMF for more loans, and the U.N. is taking on this issue next week.  

COVID-19 Economy FAQs

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

Give me a snapshot of the labor market in the U.S.

U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.

What do I need to know about tax season this year?

Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.

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