The following trends emerge for the enabling environment from the data collected since the Global Financial Crisis of 2007–2009.

There has been a consistent erosion of institutions across regions, including weaker checks and balances and less transparency.

Well-functioning formal and informal institutions are critical, both for guiding long-term economic progress and ensuring effective short-term crisis responses. The data from the Executive Opinion Survey suggests that business leaders see significant deterioration in important features of institutional quality over the past decade. The perception of judicial independence declined by about 4.6% in G20 economies since the Global Financial Crisis (Figure 1.1). Similarly, the efficiency of the legal framework in challenging regulations indicator, which measures the extent to which companies can effectively settle disputes with public authorities, declined by 7.9% in G20 economies from 2009–2020 (Figure 1.2).

The second aspect of institutional quality where business leaders’ perceptions have remained persistently low globally or declined is transparency. For instance, in some advanced and emerging countries, transparency in securing public contracts has been on a declining trend (Figure 1.3). More generally, the transparency gap—as measured by the Corruption Perception Index (CPI)—between the best and the lowest performers is large: to date, 31 points (on a 0–100 scale) separate the average score of the 10 most transparent countries from the average of the least transparent ones, and 10 points separate the average score of advanced economies from the average score of emerging and developing countries.

Persistent transparency gaps affect citizens’ trust in institutions. As shown in Figure 1.4, public trust of government and transparency go hand in hand in the majority of OECD countries. The COVID-19 crisis happened at a moment when, in several economies, trust in the credibility of political leaders was already low. However, the pandemic has also offered an opportunity for governments to regain trust by implementing emergency measures in speedy and transparent ways, and public policies that set countries on a new trajectory of shared prosperity.

Emergency and stimulus measures have pushed already high public debt to unprecedented levels, against a backdrop of shifting tax bases.

The importance of maintaining budget discipline and macro-economic resilience during boom years becomes evident during crises when public sector expenditure is crucial to keep the economy afloat.

Debt levels were already high before the crisis, relative to past decades. In advanced countries, efforts to respond to the 2008 global financial crisis and slow growth have kept debt levels to GDP 20% higher than pre-2008. In developing countries, debt-to-GDP ratios increased by 10-15% since the end of the commodity super-cycle in 2014 (Figure 1.5).

In the wake of the COVID-19 crisis and the subsequent, necessary policy responses, advanced economies’ debt-to-GDP ratios are expected to surge from 105.2% in 2019 to 122% by the end of 2020; in emerging G20 countries, from 54.2% to 63.3%; and in low-income, developing countries, from 43% to 47.4%.3 As some countries entered the health crisis with already high debt levels and slowing growth, fiscal space has partially reduced the size of deficit-spending programmes. This has been further exacerbated by shifting and partially shrinking tax bases due to slower growth, profit-shifting by multinational firms, and relatively low levels of progressivity in households’ taxation compared to the past.4

An increasing public-debt burden presents new challenges for future growth, potential debt sustainability challenges and financial instability, especially in developing countries. It also challenges current tax systems and calls for a review of tax structures. Further, in countries where trust in institutions is declining, there may be doubts about the efficacy of public spending of the large amounts being mobilized to stabilize the economy in the current crisis.

ICT access and use have been improving globally but remain far from universal, and the COVID-19 crisis has made catching up has become more difficult for developing economies while deepening advanced economies’ digitalization.

Digitalization has advanced at a fast rate in the past decades. Globally, internet users doubled since 2010, surpassing 50% of the world population5; and every sector of the economy has seen a fast uptake of digital technologies (Figure 1.6). Despite this progress, however, large gaps in ICT adoption remain, and the digital divide—the disparity between those who have adequate access to ICT and those who do not—is still on the rise. Only 53.6% of the global population is using the internet and only 14.9% of the population has an active fixed-broadband subscription.6

Digital divides also persist within countries. Large shares of households or companies have not yet integrated into the digital economy. In the United States and Europe, 10% of fixed broadband subscribers can only use low-speed (below 10 Mbps) internet service and 30% of broadband subscriptions can use only internet connections below 30 Mbps.7 In emerging and developing countries, digital exclusion is extreme: 95% of the offline population lives in these countries. Households that can access fixed broadband subscriptions are a minority (11.2%), and over one-half of all households can only use basic fixed-broadband connections, where speed is below 10 Mbps. In addition, electricity access in low-income countries is limited or unstable, further reducing the possibility to build a digital economy.8

With the outbreak of the COVID-19 pandemic, the expansion of the digital economy has further accelerated in both advanced and emerging economies. Notably, the volume of e-commerce transactions has fast-tracked in several countries.

For instance, in the United States, e-commerce has climbed by 24% in one year (July 2019-July 2020), after having increased by an average of 10% per year from 2010 to 2019. Globally, the number of e-learning courses has risen steeply, as over 1.2 billion children are out of schools due to COVID-19 measures this year.9 Remote working, telemedicine, videoconferencing and online entertainment have all been on the rise since the beginning of the pandemic.

These trends are expected to continue in the next years, widening the gaps between digitalization leaders and followers, both across and within countries and across and within industries or companies.