The ongoing coronavirus pandemic has placed significant pressure on national health systems forcing governments to adjust their financial policies. Foreign aid flows were also affected with many international multilateral and bilateral donors taking urgent action to stabilize the economic, social, and health sectors of developing countries. Others, conversely, have cut their foreign aid and redirected the funds to finance internal needs.
In the context of high market volatility, DevelopmentAid hosted a thematic webinar with the organization’s top experts, Sergiu Casu (Head of Business Development) and Mircea Chiriac (Market Research & Analysis), who presented several aid projections to indicate the anticipated funding fluctuations from the largest bilateral and multilateral donors over the next few years.
An overview of international resource flows to developing countries
International resource flows to developing countries have been affected by the COVID-19 pandemic. The Official Development Assistance flows (ODA – the official term to describe aid), for example, grew steadily by US$5 billion per year from 2019 reaching US$162 billion in 2021. A similar trend can be observed for the rates of global remittances that decreased slightly in 2020 by US$5 billion followed by a strong recovery in 2021 to reach a growth of US$14 billion. Foreign Direct Investment (FDI) in developing countries decreased significantly in 2020 by US$76 billion only to recover slightly in 2021 by US$28 billion. The tourism industry was by far the sector most affected by the pandemic showing a significant decline for two convective years – by US$315 billion in 2020 and US$43 billion in 2021. Taking into consideration the rapid spread of new COVID variants and the subsequent travel restrictions, it is to be expected that the tourism sector will also suffer in 2022.
Fig.1. International resource flow to developing countries (2019 – 2021)
DevAid’s ODA flows projections
Based on the analysis performed by DevelopmentAid’s internal research unit, the flows of ODA are expected to grow over the next four years by US$3.1 billion reaching a maximum of US$174.1 billion in 2025. This growth represents an 11% increase compared to 2020. Nevertheless, based on current ODA trends different calculations can be made that show both more optimistic and less optimistic results although, in this instance, the calculations were based on a moderate growth scenario. Unpredictable events can always be expected which may influence further ODA evolution.
Fig. 2. ODA from 2014 to 2020, with projections to 2025, USD billion
In the context of high market volatility, the observed donor activity in terms of the number of tenders published can be a useful tool to build projections. Thus, based on the internal database of records on the number of tenders published on developmentaid.org, it can be observed that during 2020 the World Bank (WB), the European Commission, and the Inter-American Development Bank increased their funding towards financing projects in the development sector (see fig.3).
For 2022, our research unit expects that the six largest development institutions listed in Figure 3 will announce a higher number of tenders.
Fig.3. Actual and projected donor activity in terms of tenders for 2019-2022 (# of tenders)
When asked about the capabilities of the research unit, Sergiu Casu, the Head of Business Development at DevelopmentAid, confirmed that it is able to offer detailed, comprehensive, and timely reports in response to the majority of the questions that organizations may have that are related to the international development and cooperation sector. Moreover, due to access to a unique database of tenders, grants, and awards from over 180 international donors, DevelopmentAid can compile reports that offer a clear, helicopter view on the dynamics of funding in either specific sectors or geographical areas.
Casu commented that DevelopmentAid’s clients state that timely access to valuable market information plays a vital role in securing contracts as the donor-funded market becomes more competitive all the time.
All those who wish to learn more about DevelopmentAid’s research capabilities and expertise are encouraged to connect with Sergiu Casu. For anyone who did not have the opportunity to join us for this online event, a link to the recorded version can be found here. The presentation materials used during this webinar can be requested at i.ilasco@developmentaid.org.
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