Davos Agenda

'Multiple shocks': Economic headwinds hamper progress on global development goals

Every year, there is a $4 trillion shortfall for the funding needed to meet the SDGs, according to the UN Conference on Trade and Development.

Every year, there is a $4 trillion shortfall for the funding needed to meet the SDGs, according to the UN Conference on Trade and Development. Image: Fikri Rasyid on Unsplash

Spencer Feingold
Digital Editor, World Economic Forum
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Davos Agenda

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  • At the mid-point of the Sustainable Development Goals 2030 Agenda, progress on many targets has slowed.
  • Tighter financial conditions, geopolitical tensions and the climate crisis are sparking questions on the trade-off between immediate security and development investments.
  • Economic disruptions have had an especially significant impact on developing countries.

Progress on many of the United Nations' Sustainable Development Goals (SDGs) has eroded in recent years as economic disruptions continue to stymie growth and development — especially in developing countries.

Overcoming hindrances to the SDGs is a major topic of discussion in New York this week as world leaders as well as various public and private stakeholders gather at the UN General Assembly and at the World Economic Forum's annual Sustainable Development Impact Meeting (SDIM).

“The world has been facing unprecedented challenges, multiple shocks,” Hala H. ElSaid Younes, Egypt's Minister of Planning and Economic Development, said during an opening session at SDIM.

The summit is convening following the release of the Forum's September 2023 Chief Economists Outlook, which paints a pessimistic picture of the current trajectory for global development. Economic headwinds are having a “particularly acute impact in developing countries while also sapping global momentum to achieve progress on development goals,” the report states. “The cumulative effect is disheartening.”

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The SDGs were set in 2015 and have a deadline of 2030. Their aims include eradicating poverty, ending world hunger, sustainable management of water and sanitation for all, and reducing inequality within and among countries.

In July, the UN said that progress on more than half of the SDGs is “weak and insufficient,” while progess on another 30% has “stalled or gone into reverse.” The Chief Economists Outlook also notes that “at the midway point between the launch of the SDGs process and their target date for achievement in 2030, progress is way off track.”

Economic headwinds and development

Global development is being impeded by numerous factors. Hindrances include geopolitical tensions, supply-chain disruption, trade tensions, the climate crisis and the various aspects of stagflation, among others.

“The cost-of-living crisis has been particularly damaging to global development efforts, pushing up to 95 million more people into extreme poverty as of last year and widening inequality around the world,” the Chief Economists Outlook states. “At the current pace, more than half a billion people will still live in extreme poverty in 2030.”

Tight financial conditions have also restricted lending conditions and impacted flows of cash for global development. Of the chief economists surveyed for the Forum's report, 58% said they expect this situation could continue to hinder progress on the SDGs for the next three years.

Infographic illustrating the challenging backdrop for economical development.
A majority of chief economists see tight financial conditions hindering global development in the coming year. Image: World Economic Forum

Moreover, the tougher economic environment has left global development efforts facing strong competition for financial resources from other pressing priorities. For instance, 59% of respondents to the Chief Economists Outlook agreed that developing countries are confronting an intensifying trade-off between closing development gaps and responding to climate change.

“The climate agenda is crucial, but the issue is that developing countries spend about 5% of their GDP on adaptation,” ElSaid Younes added. “So financing is key.”

Geopolitical tensions are also undermining progress on global development goals, and are likely to continue to do so over the next three years, according to 74% of the report's respondents.

“Politics is a big driver of the uncertainty,” Saadia Zahidi, Managing Director at the World Economic Forum, noted during the SDIM session.

Supply-chain disruptions and slumps in trade volume caused by economic turmoil and geopolitical disputes are impacting development, too. Furthermore, there is concern that an increase in trade restrictions and global fragmentation could further impede progress and exacerbate inequality.

“Global gaps have widened in areas including food security, the eradication of extreme poverty, climate action and the protection of biodiversity,” the Chief Economists Outlook notes.

Progress on more than half of the SDGs is ‘weak and insufficient’, the UN says.
Progress on more than half of the SDGs is ‘weak and insufficient’, the UN says. Image: UN Sustainable Development Goals Report 2023

Can we still achieve the SDGs?

Every year, there is a $4 trillion shortfall for the funding needed to meet the SDGs, according to the UN Conference on Trade and Development. This funding gap is up from the $2.5 trillion shortfall estimated in 2015.

There is “a glaring need for more effective mobilization of finance,” the Chief Economists Outlook states.

However, private capital could have a radical impact on development in a wide array of areas, the chief economists believe. Practically all of the respondents (97%) say it could be effective or highly effective in driving digital transformation — a shift that could have spillover benefits in education, health and the deployment of zero-carbon technologies.

“This digital transformation is really the wind beneath the sails,” Nela Richardson, the Chief Economist and Environmental, Social and Governance (ESG) Officer at Automatic Data Processing Inc. (ADP), said during the SDIM session

Energy access and affordability could also be improved by rises in flows of private capital, according to 76% of chief economists. And around two-thirds (67%) believe this funding could catalyze progress on food systems and nutrition as well as on climate change and biodiversity loss.

The report also calls for companies to operate in a more socially responsible way throughout their supply chains. This can not only benefit people in developing countries, the Outlook explains, but can also help companies themselves, with research indicating that firms which prioritize social and sustainable procurement grow 10-20% faster than their competitors.

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Davos AgendaEconomic ProgressFinancial and Monetary Systems
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