How emerging economies thrived during the pandemic

The Coronavirus Crisis has been an unusual period for the entire world, a black swan that disrupted global economies. The […]

The Coronavirus Crisis has been an unusual period for the entire world, a black swan that disrupted global economies. The world witnessed 72,084,868 coronavirus cases and 1,610,265 deaths as of 14th December. It stalled global supply chains and movement, disturbed industries, changed consumer trends and so on. Economies all around the globe were affected directly as well as indirectly. Our globalized world suddenly transformed into a virtually globalized world. Some economies have still not crossed their pre-covid levels and are still coping.

On screening 171 nations, we narrowed down to 6 countries that showed resilience amid the pandemic, using GDP as our metric. We studied the primary cause-effect relationships, key industries, prospects, and if their flexibility is sustainable going ahead.

We screened economies having greater GDP numbers in Q2 FY2021 than the overall median (-3) of all economies over the same period.


When world economies staggered under the burden of the COVID-19 outbreak, Turkey managed to handle this period with little damage and ended Q3 with an outstanding performance.

In the past two years, the Turkish economy has grown below its potential because of the constant exchange rate attacks, and then the coronavirus outbreak. Fixed-capital investments, capital-boosting projects and significant household spending have become a low priority. The strong momentum was tampered, but once it stabilises, there is a strong possibility that it will regain this strength. In the chart below, it is a picturesque display of the Turkish economy’s resilience.

Figure 1-Turkish GDP Q3 compared to rest of the world

Industrial production index increased by 8.1% on an annual basis, and quarterly rising by 7.7% in September. The highest jump in Europe on a YoY basis. Medium-high technology products took the lead with a 13.8% increase YoY.

Turkish policymakers are on the verge of building a safe investment environment. They plan to maintain their economic guidance to domestic and international investors, a step to spur investments. The investment-friendly environment will stand on three pillars: price, financial and macroeconomic stability. With a competitive currency level, the new model aims to boost exports, increase tourism income and reduce imports.


Lithuania is not only among the very few countries that showed resilience during the pandemic, but its open economy stance is likely to give it a considerable bounce back once we are about to normal functioning. Outperforming the E.U. in 2019 in terms of GDP growth, Lithuania’s GDP grew by 3.9% compared to a 1.5% growth in the E.U. Until COVID-19 stoke, the Lithuanian economy grew faster for the third consecutive year than expected: GDP growth averaged 3.9%.

Over the past decade, the economy has steadily developed its position in the mostly free category. At the onset of the pandemic, foreign demand contraction dwindled the exports to a 4-year low of 1916.2 EUR million in April 2020. They adopted the first version of the stimulus plan in March, on the very first day Lithuania went into quarantine.

A few years ago, Lithuania announced their plan to become number one in the E.U. for fintech. The strides and measures taken by the Central Government in partnership with business societies and consumer associations have led to this growth. In the context of COVID-19, fintech rapidly catered to consumers’ and business clients’ growing demand for many transactions and different types of financial services. High dependence of Lithuania on fintech as a sector has bolstered the economy during such a crisis. Another tech-driven sector embraced by Lithuania is iGaming. Over the last few years, some iGaming giants have established a presence in Lithuania, including Betsson and NetEnt.

When discussing Lithuania’s economy, the gross domestic product (GDP) per capita over the last ten years, it is the fastest-growing country in the Organisation for Economic Co-operation and Development region. Lithuania’s incredible achievement is implanted in its fiscal discipline; before the coronavirus crisis, they had no macroeconomic imbalances and had a healthy position. For a few years in a row, Lithuania has had a surplus in their public finances and one of the lowest debt to GDP ratios at less than 40% of GDP, which allowed them to use the additional fiscal space to stimulate the economy effectively.

Figure 2- Lithuania’s GDP per capita

The economy has historically maintained fiscal discipline, a rarity in today’s global stature. Not only does its reliance on sectors like fintech, laser industry, and some niche areas of biotechnology give it exposure to the futuristic sectors, but the ease of doing business paves the way for a sustainable future.

Figure 3- Lithuania’s Debt to GDP

Lithuania has seen an exponential rise in COVID-19 cases, with fewer deaths in a linear fashion. A massive wave in new Covid-19 cases and the reintroduction of social distancing measures bode ill for the recovery in the fourth quarter. The activity slipped back into contraction at the tail end of the year.


Taiwan’s economy faced a massive downturn in 2009 due to a substantial reliance on exports made it vulnerable to world markets. There was a straight 50% downswing in the exports. The pandemic led to a similar setting, but a complete turnaround in the outcome. Taiwan’s resilience revolves around several themes like virus containment, US-China tensions, surging exports and strengthening of indigenous currency.

Figure 4- USDTWD is at an all-time-low displaying TWD strength

Export orders reached US$141.08 billion in Q3, up 19.1% QoQ, or up 11.9% YoY. The order book’s improvement caused by Taiwanese high-tech device exports neutralised the virus’s impact on traditional industrial. Relief measures stimulated domestic consumption and rose 5.1% in Q3, the fastest pace since the government began releasing the data in 2011.

Figure 5- Taiwanese Exports reached an all-time-high. It performed relatively stronger during COVID-19 than the Financial Crisis of 2008.

The restriction on people’s routine activities and business interactions and the resulting increase in remote work and online learning boosted the demand for 5G communication applications, high-performance computing devices, electronic components, and other information communications technology-related products and video components.

Taiwan holds the world’s best virus record and has only recorded 7 deaths since 11th April 2020. There has been no second wave. Experts acclaim tight regulations, rigorous contact tracing, technology-enforced quarantine and widespread mask-wearing went a long way to contain the virus. Further, Taiwan’s deadly encounter with SARS may have scared people into compliance.

The U.S.- China tensions posed an asymmetric opportunity for Taiwanese exports to China. In September, they surged 22.3% and were mainly driven by demand from Huawei Technologies Co. before the U.S. imposed ban on sales to the Chinese tech company. Taiwan Semiconductor Manufacturing Co. which accounts for 30% of the Taiwan Stock Exchange’s market capitalisation, has been Huawei ban’s biggest beneficiaries. The chipmaker smashed estimates with a 36% YoY increase in net income in Q3. Not to mention, Taiwan’s leading stock exchange has also been trading near its record high, displaying positive signs for the investors. Taiwan dollar outperformed most Asian currencies this year against the greenback, adding more than 4%.

Figure 6- Taiwan Semiconductor Manufacturing Co. reached an all-time-high in December 2020. It accounts for 30% of Taiwan’s major stock exchange.

Keeping Huawei aside, demand connected to remote working and 5G further boosted TSMC and other hardware companies. Restructuring regional supply chains away from China have also been driving investment in Taiwan.

Taiwan’s projected development will have to rely on additional transformation to high technology and service-oriented economy. In recent years, Taiwan has diversified its trade markets. Taiwan’s sole dependence on the United States continues to decrease from 49% in 1984 to 20% in 2002 as its exports to Southeast Asia, and mainland China is leaping.


Vietnam is a fast-paced developing economy. It is an export-import centric nation, and a foreign-direct investment attraction for many years now. The GDP per capita sits at an all-time-high of $2082.2 as of 2019. The pandemic allowed it to capitalise on companies heavily reliant on China while offering supply-chain diversification.

Figure 7- Vietnam’s GDP per Capita

With just 1377 coronavirus cases, and 35 deaths (constant since 5th August 2020), Vietnam has garnered international praise for its swift and effective response to the COVID-19 outbreak.

Domestic spending has long been a critical engine of growth for the Vietnamese economy, accounting for 68% of GDP. Closing of borders stalled growth, but its dependence on domestic consumption gave it an extra mile to run. Moreover, Vietnam’s halt of non-essential activities lasted only 22 days, a notably shorter period than majority nations. This also eased downward pressure on domestic consumption and gave it a head start.

Manufacturing has played a crucial role in Vietnam’s growth, leading Vietnam to achieve one of the highest trade-over-GDP ratios in Southeast Asia. And then COVID-19 happened, initially disrupting supply chains, fuelled by China going into lockdown, and then by plummeting demand as export markets stalled. With the global scenario deteriorating, discretionary exports took a hit, and planned investment became a low priority cause a 21% drop in FDI.

The U.S. became Vietnam’s leading export market between January-May period with a turnover of US$24.6 billion, an annual increase of 8.2%. Additionally, the country has long been an attractive offshoring destination: its share of labour-intensive manufacturing exports from emerging markets grew by 2.2% between 2014 and 2017. Its offshoring subsector could surge, especially if companies make more extraordinary efforts to diversify their supply chains. A step that companies like Apple, Pegatron, etc., are undertaking.

For instance, Tech giant- Apple Inc. is about to manufacture a brand-new product (over-ear headphones) outside China for the first time. It also has asked Foxconn to relocate some of its iPad and MacBook production to Vietnam to diversify its supply chain.

Figure 8- Vietnam’s dependence on imports and exports

Cayman Islands

Between 2013 and 2019, the Cayman Islands government has achieved the rare regional feat of steadily running fiscal surpluses backed by increasing revenue. This trend has coincided with a steady reduction in the Islands’ debt stock over the period. In 2019, the central government recorded net lending of $102.1 million. The consistent fiscal surplus has been backed by robust economic and revenue growth. Sound government planning has left the islands with fiscal space to deal with pandemic’s harsh economic impact.

Figure 9- Key Fiscal Indicators


The Chinese economy is literally a model for the rest of the world, with their unemployment rate almost back to pre-covid levels. They recorded an all-time high export level of USD 268.07 billion in November, a 21.2% growth on YoY basis.

Figure 10- Chinese Exports

Individual sectors were impacted in distinct ways and demonstrated a wide divergence. The paradigm shift to remote working, social distancing and virtual communication being one of the reasons. The transition was evident as information technology, consumer discretionary, and communication services outperformed China’s broader market.

An unusual sector that displayed exceptional outperformance was Healthcare. As the world’s third-largest pharmaceuticals market, companies involved in drug development and distribution for a COVID vaccine drove this sector’s gains.

Another fundamental tailwind for the Chinese pharmaceutical industry accelerated during Q2, following the introduction of the revised Drug Registration Regulation on 30th March 2020. Long story short, the regulation eases drug development, encourages R&D within the pharmaceutical sect, harmonise China’s system with international standards, alleviate domestic and FDA, and accelerates the review and approval process for critical drugs.

China’s Consumer Staples sector also outperformed the broad market. Consumers were buying more localised beverages, grocery store items and packaged foods while staying home and less dining out in-person. Along with higher commodity prices, the resumption of economic activity, and a slowdown in trade contributed to higher relative returns in China’s consumer staples sector. Also, owing to the increase in prices for crucial imported inputs such as wheat and corn and soy.

China is lauded throughout the world for its ability to clamp down virus cases and deaths associated to it. Policymakers have done a phenomenal job of navigating through an uncertain economic climate and avoiding a second-wave infections. They built robust systems for contact tracing and identifying inbound cases from returning travellers. Unlike other countries where the virus cases have risen exponentially, China has a flat line and constant death number since 17th April.

It took less than a month from making the policies to implementing the fiscal fund transactions. China’s agility to deploy a unique transfer payment mechanism, a channel established to directly transfer funds from the central government to the local government, became a huge success.

The central government reiterated that fiscal funds should concentrate on “six priorities” – employment, livelihoods, expansion in market entities, food and energy security, stability of industrial and supply chains, and harmony at the community level. Additionally, to ensure balance in the six areas of employment, finance, foreign trade, foreign investment, domestic investment and market expectations.

During the first ten months of 2020, China’s financial system helped firms save a total of 1.25 trillion yuan ($188.8 billion) through cuts in interest rates and bank charges, allowing qualified micro, small, and medium-sized enterprises to delay payment on loan principal and interest. China’s annual expectation to help businesses save 1.5 trillion yuan for the whole year is only yardsticks away.

Adequate support at the grass-root level boosted the consumer’s confidence. By the end of Q2, new funding for micro and small businesses was 3 trillion yuan, an increase of 1.2 trillion yuan YoY. The funds supported 31.28 million small business entities, an increase of 21.8% YoY. Additionally, The People’s Bank of China’s (PBOC) focus on the manufacturing and medium, small and micro firms, somewhat helped mitigate the divergence in various sectors.

Chinese households often regarded as the world’s best savers—until recently. In the recent five years, household debt has surged to 128% of household income, and 56% of Chinese GDP. Rising debt is precisely associated with the Chinese property market in the form of mortgage debt. Consumer credit has expanded rapidly, as well. Economic fallout from the COVID-19 outbreak now looms to intensify the financial risks arising from increased household borrowing, which might directly impact financial stability, consumption growth, and the broader economy. The household debt numbers have notched a record high of 59.1% as of July 2020, a rise of 8.24% YoY.

Figure 11- Chinese household metrics compared to that of the USA

The foreign investments scaled a notch higher during the pandemic, displaying signs of confidence and revival. There was no significant sentiment change in multinational companies’ outlook regards to China. A breakdown of data showed FDI inflow in the service industry hiked 11.6% from January to July to 414.59 billion yuan from the same period last year. Total investments from Hong Kong, Singapore and the United Kingdom logged a YoY growth of 8.2%, 4.6% and 48.6%, respectively. During the first seven months, 18,838 new foreign-funded enterprises were established in China.


Turkey and Lithuania were already following strong momentum and were halted by the pandemic or some other reason. Once they neutralized the cause of the core problem, their economies came back to normal and performed resiliently.

Taiwan, Vietnam, Cayman islands and China were followed by various trends like efficient fiscal policies, pandemic induced opportunities, and supply chain opportunities. These triggers have improved their prospects and will continue to build constructively on their sturdy foundations in the coming years.

Overall, these countries also display wide global presence, their impact on global economies is quite significant according to their sizes. They all portray export-import relevance in the global picture, and our highly developed technologically, which aided expansion during the outbreak. Most of these economies are in the crosshairs for future foreign investment and can resonate well with futuristic industries. These economies could outperform the broader market, given they follow the current trends and maintain their fiscal and monetary balance.

15 December 2020

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