Emerging markets face ‘unparalleled’ civil unrest, as economic impacts of pandemic unfold

Published: Wednesday, 22 July 2020 09:58

As the economic fallout from the COVID-19 pandemic mounts, protests in emerging and frontier markets are set to swell with millions of newly unemployed, underpaid, and underfed citizens, posing a risk to domestic stability with few parallels in recent decades. This stark assessment comes from global risk analysis company Verisk Maplecroft on the back of the release of its latest Civil Unrest Index Projections report. The firm identifies 37 countries that will face major spikes in unrest during the second half of this year, driven by a painful post-pandemic economic recovery that will inflame existing public anger with governments.

Unrest in emerging and frontier markets fell in March, following the widespread introduction of lockdowns. But protests are hitting the streets worldwide once more, as long-standing grievances over socioeconomic inequalities, civil and political rights and government corruption resurface.

“The total number of protests in frontier and emerging markets has almost rebounded to pre-pandemic levels,” says Verisk Maplecroft Principal Analyst Miha Hribernik. “With many countries still in lockdown, and the full economic shock of the outbreak yet to be felt, we expect the number of protests to surge over the next 2-3 months.”

The outlook is particularly concerning for frontier and emerging markets where the post-pandemic economic picture is bleak. Using data from the company’s six-month Civil Unrest Index Projections and its Recovery Capacity Index (RCI), Verisk Maplecroft found 37 countries with both a low level of recovery capacity and high projected levels of unrest in the next six months. The RCI measures a country’s ability to bounce back from the pandemic by assessing the strength of state institutions, physical and digital connectivity, economic dynamism, population sensitivity, and country-specific factors, such as natural disasters or terrorism, that could impede recovery.

The highest risk countries include Nigeria, Iran, Bangladesh, Algeria and Ethiopia, which face a ‘perfect storm’ of popular anger as protests driven by the pandemic’s economic fallout inflame unrest over pre-existing grievances.

However, several major emerging markets, including India, Brazil, Russia, South Africa, Indonesia and Turkey, sit just outside the ‘perfect storm’ category. Risks in these countries are only slightly less acute and still constitute a significant threat to stability.

While strong recovery capacity limits the level of risk, it does not eliminate it, particularly where pre-existing grievances centre around political rights or other structural issues. India (21st) remains focused on tackling an explosion of COVID-19 cases, but anger over the Citizenship Amendment Act is set to resurface. And while Hong Kong (28th) quickly suppressed the first wave of the coronavirus outbreak, anti-government protests have resumed and will continue despite the recently introduced national security law.

The outlook is also negative for the US, which is now the 48th riskiest jurisdiction globally after recording the second biggest drop on our Civil Unrest Index between 2020-Q2 and Q3. The combination of the Black Lives Matter protests, alongside mounting frustration over job losses and President Trump’s ‘weak pandemic response’ means more unrest is inevitable.

www.maplecroft.com