- The COVID-19 pandemic inflicted the worst economic crisis since the Great Depression.
- The least developed countries face the greatest risk of long-term consequences.
- The global community must come together to protect and support the most vulnerable populations.
In less than one year, the COVID-19 pandemic has turned the world upside down. While vaccines give us some comfort, we are far from a decisive victory. The path ahead is no less perilous as we face an uncertain recovery.
“The World Economic Situation and Prospects 2021” – the flagship publication of the United Nations Department of Economic and Social Affairs – says the pandemic inflicted the worst economic crisis since the Great Depression.
It also warns us that the devastating economic impacts of the crisis – permanent job losses, decline in potential outputs, and rising poverty and inequality – will be felt for years.
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Having absorbed enormous short-term economic and social costs, all countries – but especially the developing ones – now face even more significant long-term consequences unless we take bold and forward-looking measures to put the world on track towards sustainable development.
The crisis has laid bare many fault lines in our societies: differences in exposure to the virus and access to health care, inequities and inadequacies in social protection coverages and, more importantly, gnawing disparities in the economic response. In both developed and developing countries, low-skilled, low-wage workers, many of them women, were disproportionately affected by lockdown measures as their jobs – where they continued – did not allow for remote work. Furthermore, they could not fall back on savings to avoid exposure to the virus.
But the crisis also exposed the stark disparities in the fiscal response. We cannot ignore the fact that 46 least developed countries (LDCs) – with a population of more than 1 billion – collectively managed to cobble together only $17.3 billion of fiscal stimulus to respond to the crisis. In the LDCs, this is a mere $17 per person. In contrast, the developed economies spent nearly $10,000 for every citizen. This means the rich countries managed to spend nearly 580 times more per person for every dollar that the LDCs spent. For context, the average per capita income of the rich countries is only 30 times higher than that of the LDCs.
In these critical times, the developing countries – especially the LDCs and other vulnerable countries – badly needed international support. But little came their way.
The path to recovery will remain a bridge too far if the global community fails to support those most in need. We cannot just afford to help people within our national boundaries. This is the time for demonstrating global solidarity. This is the time for us to rise to the occasion and see people, planet and prosperity as a whole, and not through the prism of narrow national interests. We must protect and support the most vulnerable billions worldwide – and give them a fighting chance – if we are serious about an inclusive, robust and sustainable recovery. This will require us to take a fresh look at the root causes of vulnerabilities and rethink resilience, not only at the national level but also at the global level.
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It is critical that we quickly stimulate trade to create jobs and fight back economic vulnerabilities. As “World Economic Situation and Prospects 2021” underscores, global trade was already facing significant risks and challenges against the backdrop of rising trade tensions as well as digitalization, automation and servicification of trade. These trends disadvantaged many developing countries, especially those facing digital and infrastructure constraints. It will be hard, if not impossible, for the developing countries – especially the most vulnerable ones – to stimulate recovery without stimulating exports. Creating even playing fields with a revitalized, rules-based and non-discriminatory multilateral trading system, and making sure that the developing countries can rely on trade as their engine of growth, will remain critical to both accelerate recovery and achieve sustainable development objectives. Renewed global solidarity and a reinvigorated spirit of multilateralism based on mutual respect and understanding are musts for reviving global trade.
While international cooperation will remain critical for stimulating trade, we will also need to rethink strategies for strengthening social protection systems to support the most vulnerable population groups. It is a tragedy that nearly 55% of the world population – as many as 4 billion people worldwide – lack formal social protection, which is a critical safeguard against systemic shocks like the one we suffered in 2020. In Africa, 80% of the population has no formal social protection. Social protection is not just a moral imperative, it is also an economic necessity as it can act as an automatic stabilizer that helps build the resilience of countries and people to the impacts of a shock. Ensuring social protection for everyone will require international support and cooperation, not only in the form of financial support, but also technical assistance to developing countries on how such schemes can be put in place to protect the most vulnerable in times of crisis.
During the last 50 years there has been unprecedented progress in human indicators – life expectancy has increased to record levels; infant- and maternal mortality has fallen; more girls are staying in school; more people have been lifted out of poverty than ever before; and inequality between nations has narrowed. The market system has served us well.
But deep fractures are beginning to show: gaping inequality within almost all countries; record environmental degradation and species loss; and the broader impacts of irreversible climate change. Our markets are unsustainable – and we need a new economic model.
To tackle these challenges,Transforming Markets is one of four focus areas at the World Economic Forum's 2019 Sustainable Development Impact summit. A range of sessions will bring stakeholders together to take action that places human and environmental health at the core of market systems and value chains. These include building sustainable markets, responsible supply chains, moving beyond disposability, circularity and scaling solutions of the Fourth Industrial Revolution, among others.
The international community will also need to muster the will and courage to prevent a debt crisis that will disproportionately affect many developing countries and derail their recovery prospects. As many as 35 low- and lower middle-income countries are facing significant debt distress. Many are facing the looming risks of debt overhangs, which means that servicing their already high debt burdens will prevent them from making the much needed investments – in their people, in sustainable and productive infrastructure and in climate adaptation and mitigation efforts – that are essential for sustainable growth and prosperity in the future. A debt crisis will be too costly, and it would undoubtedly exacerbate poverty and inequality in many developing countries.
There needs to be an immediate breakthrough and concrete commitment to reduce the debt burden of the most vulnerable countries, with meaningful debt relief and debt restructuring. This is a must if we are to steer the world towards the path of resilient and sustainable recovery.
It is time for the international community – including private sector creditors – to come together to make debt sustainable for the most vulnerable countries. The cost of delay and disunity will be too high for us all.