Developing countries need support to tackle economic setback caused by COVID-19: UNCTAD

The UN Agency, in Least Developed Countries Report 2021 released September 27, 2021, urged for increased investment in state and productive potential for the LDC group.

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Developing countries need support to tackle economic setback caused by COVID-19: UNCTAD

The Least Developed Countries (LDC) need help from the international community to develop productivity to recover from the economic setback due to the novel COVID-19 pandemic, according to the United Nations Conference on Trade and Development (UNCTAD).

The UN Agency, in Least Developed Countries Report 2021 released September 27, 2021, urged for increased investment in state and productive potential for the LDC group.

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Productive capacities is the productive resources, entrepreneurial capabilities, and production links that together determine a country’s potential to produce goods and services and enable it to grow and develop. UNCTAD prepare productive capacities through the utilisation of its Productive Capacities Index (PCI), which demonstrates that differences in socio-economic development across countries and regions are a consequence of gaps in their productive capacities.

It includes technological and production capabilities, financial resources, infrastructure, institutions, efficient market systems, skills and the policy-implementing capacities that a country needs to produce the goods and services that it consumes domestically and exports competitively.

The LDC needs massive investment and spending to achieve the United Nations-mandated Sustainable Development Goals (SDG), which goes far beyond their financial resources, the report warned. The UN established the LDC category 50 years ago. The grouping of the world’s weakest economies has expanded from an initial 25 countries in 1971, peaking at 52 in 1991, with only six countries progressing enough to no longer be considered an LDC. These six countries are Botswana, Cabo Verde, Equatorial Guinea, Maldives, Samoa, and Vanuatu.

The number of LDC since January 2021 has been 46 (including 34 African countries). LDCs experienced more frequent instances of growth collapses than other groups of countries, the report flagged which represented 16 percent of the total country-year observations in the case of LDCs between 1971 and 2019 compared with 10 percent for other developing countries. It was just 2 percent for developed countries, the report said.

The gross domestic product (GDP) per capita for the LDC group represented less than 10 percent of the world average in 2019, according to the report. This was even lower than in 1971, when their GDP per capita amounted to 15 percent.

Only seven LDCs (Bangladesh, Bhutan, Cambodia, Laos, Lesotho, Mali, and Myanmar) have consistently outpaced the world average GDP per capita growth by more than 1 percent and therefore have converged towards the standards of living of higher-income countries.  COVID-19 has stressed a fiscal crisis. Rising health-care expenditures, slowing trade, and support programmes to smooth consumption have increased already high debt levels in these countries.

According to the report, total government spending in LDCs was limited to at most 20 percent of GDP in 1990-2020, a low level due to a constant presence of budgetary constraints. The LDCs will have to invest $462 billion annually to meet the target of achieving a 7 percent annual GDP growth to achieve the SDGs in 2021-2030, the report said.

The financing gaps will increase progressively from 6.3 percent to 11.3 percent of GDP by 2030 in health; from 4.2 percent to 6.6 per cent of GDP by 2030 in education; and from 2 per cent to 8.5 percent of GDP by 2030 in social protection, the report found.

A new generation of international support measures are needed to enable LDCs pursue different development paths and to allow them to emerge strongly from the lingering effects of the COVID-19 crisis. Two important events present an accessible opportunity for the world to take action. On October 3-7, 2021, countries will meet online to agree on the next programme of work for UNCTAD at its 15th quadrennial conference, hosted by Barbados, Switzerland. And in January 23-27, 2022, the world will gather in Doha to craft the global plan of action for LDCs at the 5th United Nations Conference on LDCs.

Source: Down to Earth

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Developing countries need support to tackle economic setback caused by COVID-19: UNCTAD
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The UN Agency, in Least Developed Countries Report 2021 released September 27, 2021, urged for increased investment in state and productive potential for the LDC group.
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THE POLICY TIMES
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