Economy

To assist the government’s financial response to the coronavirus pandemic, Indonesia’s central bank is set to purchase $40bn in sovereign bonds as part of a debt monetisation programme – a strategy seldom used by emerging markets that could have wider implications for the region.

While global investment is expected to fall sharply this year as a result of the coronavirus pandemic, impact investment – the funding of projects that generate a positive social or environmental impact, as well as a financial return – is tipped to hold relatively steady, and could play a key role in the recovery of emerging market economies.

At the start of 2020, the Regional Comprehensive Economic Partnership (RCEP) – potentially the world’s largest free trade deal – seemed on track to be signed by the end of the year. However, the coronavirus pandemic has slowed that process, raising some questions about when the agreement will be formalised.

In recent years, Papua New Guinea has moved away from its long-held policy of tariff reductions, towards import substitution and self-sufficiency. As the coronavirus pandemic underlines vulnerabilities in public finances and international supply chains, efforts to scale up local industrial production are likely to take on renewed importance, as is the need to reduce exposure to unsustainable debt.

Peru’s response to Covid-19 won the country international plaudits in the early stages of the pandemic, thanks to its extensive testing regime and regional benchmark stimulus package. As countries begin the cautious process of reopening their economies, authorities in Peru are now looking to the mining industry to spearhead recovery.