COVID-19 Pandemic Deals a Huge Blow to the Manufacturing Exports From LDCs

The COVID-19 (coronavirus) pandemic poses a significant economic challenge to LDCs that rely heavily on exporting manufactured goods, particularly clothing and apparel, amid global demand and supply-side shocks. Clothing and apparel exports have been key drivers of formal employment, wage growth and poverty reduction in a few countries, with the share of working poor falling from about 45 per cent to 15 per cent of the workforce in these LDCs during the past two decades. A prolonged global slump will likely reverse the gains in poverty reduction and undermine structural transformation of these economies. While it is highly unlikely that these LDCs will face a debt crisis—given their low levels of external debt—the likelihood of a balance of payments crisis looms large. Additional liquidity and credit from multilateral sources will remain critical not only to avoid a balance of payments crisis but also to prevent increases in poverty and the reversal of years of development gains.