COVID-19 poses a real challenge to achieving the UN Sustainable Development Goal of ending poverty by 2030. Instead, global poverty may increase for the first time since 1990 and could represent a reversal of approximately a decade of the progress made by the world in reducing poverty. While there is no way of telling exactly what the economic damage caused by the global pandemic will be, there is widespread agreement among economists that it will have a severe negative impact on the global economy. Here we present the opinions of several DevelopmentAid experts.
What is the likely impact of the COVID-19 pandemic on developing economies?
“As mentioned, SDG targets will most likely not be met by 2030. Compounded and protracted suffering (particularly in the poorer countries) will increase. Priorities for response and ODA will change and a new focus be required. A shift from longer to short-term thinking, planning and budgeting will need to be realized; more humanitarian than development assistance will be needed, and indeed, with humanitarian assistance accounting for only approx. 12% of all official ODA, there is scope for this, shifting development budgets (from reasonably secure western and some southern donors) away from longer term strategies to shorter term tactical solutions.”
“South Africa was already in deep financial trouble before COVID arrived. Our debt to GDP ratio (in the February national budget at 60%) was rising as overspending continued unabated. Three rating agencies downgraded SA’s bonds to junk status because of the government’s persistence with unaffordable policies and it becoming obvious that SA was moving close to a fiscal cliff. The unemployment rate varied across the country but averaged around 28% prior to COVID. Enter COVID-19. The economy has been shut down for seven weeks since 28 March. Businesses are closing and people are losing their jobs. It is estimated that upwards of a million people will lose their jobs.”
“Developing countries will rarely be able to raise enough revenue and meet their fiscal targets because of reduced activities and business closures. With reduced exports because of a possible global economic recession, the balance of payments of these countries will continue to worsen as loans and interest payments become due, further shrinking the GDPs of these countries. The poverty situation will unprecedentedly worsen.”
“The COVID-19 pandemic is severely negatively impacting upon developing nations and, given that the mitigation measures that have been implemented in many countries are lockdowns, the negative effect has been felt in all sectors of society but more particularly the poor populations. Development aid programs focus on improving economies, governance, and more explicitly improving livelihoods through eradicating poverty and sustaining the environment but unfortunately, the pandemic has shifted the clock backwards with severe repercussions.”
How can developing countries manage the economic impact of COVID-19?
“The UN and other Development Partners needs to sit down with the leaders of LDCs to pragmatically and swiftly restructure the SDG timeframe – 2050 would be sensible (given the content and uncertain duration and outcomes). Compounded problems (COVID on top of famine, low economic growth, corruption, poverty, lack of livelihood opportunities) – require compounded support and solutions, including a minimizing of regulatory frameworks and conditions, a shift from loans to grants and on-budget support, and extra help with TA, so often lacking when providing financial aid to developing economies.”
“Various countries have reacted differently towards COVID-19. The lockdown was worse in developing countries relative to developed countries. The reason behind this is poor health management systems. However, due to lockdown, the private sector has been damaged drastically. Governments should encourage companies to start working at least at 70% capacity, support the private sector through wage subsidies, encourage local production over imported products through public tenders and campaign for “buy local products”, decrease the percentage of taxes for at least the first three months and continue to support capacity building though on-the-job training.”
“Most developing countries have high debts, and their budgets are strained through the servicing of various loans. Debt relief can be initiated to direct resources to the health sector to enable it to serve people with essential services.”
“Considering that the solution could not only come from the G20 countries, which are already facing their own economic and social difficulties, endogenous solutions will have to be found in each country. In the short term, it is a question of unblocking all measures that constrain local economic activity, from the physical movement of economic agents to the hidden burden of various local or national, formal and informal tax systems. It is also a matter of supporting the financial sector which will be significantly weakened by the serial failure of economic actors. The sector will find it difficult to finance the new operating cycles and hence recovery, on its own without massive financial and technical support. In the longer term, the challenge for most of these emerging countries is, and will remain, demographic control to enable everyone to be better educated, to see a brighter future for the next generation and thus limit social, racial or ethnic tensions.”
What should the international community do in order to mitigate the economic impact?
“Every crisis offers new opportunities. Globalization is scrutinized now. Glocalization should replace it. Local initiatives will impact global processes. Almost everyone should soon think about what our ‘new normal’ looks like, not necessarily increased biometric surveillance or limitations of our rights but, instead, sustainable development should finally become a cornerstone of international policies. After the COVID-19 pandemic ends, many countries will have to reinvent themselves, change their procurement policies, rethink health and social safety nets, meet people’s basic needs and improve how they treat vulnerable populations. New priorities like resilience and self-sufficiency (local goods producers and suppliers, food security including backyard vegetable gardens) will arise. The role of international organisations will be questioned. Some experts believe that the single biggest problem in communication is the illusion that it has taken place. Communication should also improve to mitigate the economic impact and show connections to other areas of our lives. Integrity should be on the agenda for new international relations.
“Most donor projects have been postponed due to COVID-19. Donors should move to “the new normal” as well, by re-considering the key performance indicators and try to act as soon as possible to support the private sector. The curve of the majority of companies has been downward and most will have to start from the beginning. Three key priorities should be taken into consideration: job creation, the connection to market and technical assistance. These three components go hand in hand for the majority of companies.”
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