Powered by MOMENTUM MEDIA
moneymanagement logo
 
 

Challenging times ahead for developing countries

World-Bank/global-growth/markets/covid/

14 January 2022
| By Liam Cormican |
image
image image
expand image

Global growth is expected to decelerate markedly from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023 and the after-effects of the pandemic will affect emerging economies most, according to the World Bank.

In his foreword to the June 2022 Global Economic Prospects Report, World Bank president, David Malpass, said progress toward recovery for developing countries had been hampered by three “daunting challenges”.

Firstly, macroeconomic imbalances had reached unprecedented proportions, partly due to record high levels of government spending, deficits and debt in several advanced economies with their central banks absorbing unprecedented amounts of long-term assets – resulting in inequitable allocation of capital.

The inequality was further exacerbated by surging COVID-19 spending and debt in developing countries, Malpass said.

“With fiscal and monetary policy in uncharted territory, the implications for exchange rates, inflation, debt sustainability, and economic growth are unlikely to be favourable for developing countries,” he said.

Malpass also said income inequality was getting worse across and within countries.

“As government’s fiscal space has narrowed, many households in developing countries have suffered severe employment and earning losses – with women, the unskilled, and informal workers hit the hardest,” Malpass said.

Malpass’ final note was that COVID-19 was causing “exceptional uncertainty” in markets, with volatile commodity prices and extreme weather events aggravating food insecurity and public health.

“New variants of the virus can put even highly vaccinated countries under pressure and threaten to wreak havoc in those with low vaccination rates—which are the poorest and most vulnerable of all,” he said.

“Supply bottlenecks have hit developing countries hard—these countries are often the last in the global supply line, outbid by countries with greater financial resources and larger orders.”

Mari Pangestu, World Bank’s managing director for development policy and partnerships said the choices made by policymakers in the next few years will determine the course of the next decade.

“The immediate priority should be to ensure that vaccines are deployed more widely and equitably so the pandemic can be brought under control,” she said.

“But tackling reversals in development progress such as rising inequality will require sustained support. In a time of high debt, global cooperation will be essential to help expand the financial resources of developing economies so they can achieve green, resilient, and inclusive development.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Significant ethical issues there. If a relationship is in the process of breaking down then both parties are likely to b...

1 day 6 hours ago

It's not licensees not putting them on, it's small businesses (that are licensed) that cannot afford to put them on. The...

1 week 1 day ago

So we are now underwriting criminal scams?...

6 months 1 week ago

Despite the financial adviser exam being rooted in ethics, two professional year advisers believe the lack of support and transparency from the regulator around the exam ...

4 weeks 1 day ago

Australian retirees could increase their projected annual incomes by as much as 51 per cent through comprehensive financial advice, according to a Vanguard study, but cos...

4 weeks 1 day ago

After last month’s surprise hold, the Reserve Bank of Australia has announced its latest interest rate decision....

3 days 2 hours ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
74.26 3 y p.a(%)
3