COVID-19’s economic impact on low-income countries: preparing for the next shock

COVID-19 hit low-income exporters hard, exposing risks from weak diversification and straining trade, supply systems and financial stability

Publishing date: 25 September 2025
Authors: Niclas Poitiers Costanza Greppi Maturana

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The COVID-19 pandemic sent shockwaves through global supply chains as borders closed, lockdowns went into effect and demand plummeted. This shock was felt particularly by low and lower-middle income countries with economies reliant on a limited set of exports. While some effects of this shock were more short-lived than initially feared, the pandemic nevertheless left a long-lasting mark on many of the countries most affected.

Commodity prices dropped sharply as pandemic measures were enacted. This initial drop was a serious problem for developing countries that relied heavily on exports of those commodities, even after prices rebounded. Amid falling export revenues, their currencies depreciated and they faced problems financing imports of vital goods such as food staples and medicines. This, coupled with increased interest rates, caused issues in servicing debt denominated in foreign currency.

Countries involved in textile manufacturing suffered from a breakdown of the supply chain caused by a drop in demand from advanced economies and closures of textile mills. This had severe consequences for the large labour force involved in textile manufacturing in low-income countries.

Overall, countries with a more diversified export base and a wider set of destination countries weathered the storm better. When designing their near-shoring and friend-shoring strategies to deal with geopolitical risk, advanced economies should take into account the risks faced by low and lower-middle-income countries in term of lack of diversification.

The authors thank Ignacio García-Bercero and Marie-Sophie Lappe for their valuable comments.

The project “Rethinking Global Supply Chains: measurement, impact and policy” (RETHINK-GSC) has received funding from the European Union’s Horizon Europe research and innovation programme under grant agreement number 101061123.

About the authors

Niclas Poitiers

Niclas Poitiers, a German citizen, joined Bruegel as a Research Fellow in September 2019.

Niclas' research interests include international trade, international macroeconomics and the digital economy. He is working on topics on e-commerce in trade as well as European trade policy in global trade wars. Furthermore he is interested in topics on income inequality and welfare state policies.

He holds a Ph.D. in Economics from Universitat de Barcelona, a M.Sc. in economics from the Universität Bonn, and a B.Sc. from Universität Mannheim. During his Ph.D. he was a visiting scholar at Northwestern University.

Niclas is fluent in English, Spanish, and German.
Costanza Greppi Maturana

Costanza Greppi Maturana joined Bruegel in March 2025 as a Research Assistant. She holds a Bachelor's degree from King’s College London and a Master’s in Specialized Economic Analysis with specialisation in International Trade, Finance, and Development from the Barcelona School of Economics. Her MSc thesis quantifies the development impact of the EU-CARIFORUM trade agreement on Caribbean economies. She has also researched the effects of non-contributory pension programs in Peru on life satisfaction and forecasted Canadian GDP using Bayesian, classical, and Markov switching methods.

Before joining Bruegel, Costanza interned at the World Bank’s Development Economics Global Indicators Group (DEC IG) for the Women, Business, and the Law team, where she conducted research on gender equality laws and policies, expanded the contributor base for data collection, and engaged with experts across Latin America and Francophone countries to refine the survey design. Prior to this, Costanza worked in e-commerce and international trade both in London and Paris, where she advised clients on pricing strategies, regulatory compliance, and cross-border trade optimization.

Costanza is fluent in Italian, Spanish, French, and English. She holds dual Chilean and Italian citizenship.