The world's least developed countries (LDCs) face a “grim outlook” as the Covid-19 pandemic led to their worst economic growth in three decades, with about $485 billion of investment needed to eradicate poverty, the United Nations Conference for Trade and Development (Unctad) said.
Their financing needs are “daunting”, with another $462bn required to meet an annual economic growth target of 7 per cent and $1 trillion to double the manufacturing sector's contribution to the gross national product, the UN agency said in a report on Monday.
“Today LDCs find themselves at a critical juncture,” Rebeca Grynspan, Unctad's secretary general, said. “They need decisive support from the international community to develop their productive capacities and institutional capabilities to face traditional and new challenges, such as the Covid-19 crisis and climate change.”
Unctad's grouping of the world’s weakest economies has expanded from an initial 25 countries in 1971, peaking at 52 in 1991, and stands at 46 currently. Only six countries that stopped being an LDC to date.
In July, the International Monetary Fund estimated the global economy will grow 6 per cent this year and 4.9 per cent in 2022. But the fund also warned of an uneven recovery and downgraded its growth outlook for emerging market and developing economies because of unequal access to vaccines and the emergence of Covid-19 variants.
Unctad called on the international community to invest in boosting manufacturing capabilities of LDCs and improve the ability of their governments to meet policy goals that will help them respond to and recover from the pandemic.
The financing is urgent as the Covid-19 crisis and the uneven global economic recovery threaten to reverse many hard-won development gains in these countries, it said. Only 2 per cent of their combined population has been vaccinated, compared with 41 per cent in developed countries.
“The pandemic has severely affected LDCs due to their reduced resilience and diminished capacity to react to the Covid-19 shock and its aftermath,” the report said.
LDCs need the financing to help achieve the UN Sustainable Development Goals (SDGs) related to structural transformation. Reaching these SDGs, however, requires massive investment and spending, which go well beyond these countries' financial means, the report said.
To leverage sufficient development finance, LDCs will need to boost their government revenue, increase their use of domestic resources and improve the effectiveness of public expenditures, Unctad said. However, that will not be enough and external help is needed.
“The international community has an essential role to play in supporting LDCs in their efforts to mobilise adequate financing for their sustainable development needs,” the report said.
Ms Grynspan urged LDCs’ development partners to consider the special needs of the more than one billion people living in these countries during Unctad’s 15th quadrennial conference to be held online from October 3 to October 7, under the theme From Inequality and Vulnerability to Prosperity for all.
Most LDCs will take several years to recover the level of GDP per capita they had in 2019, before the pandemic. The average LDC would take about three years to return to that level, while one third of 46 LDCs are expected to take five or more years, according to Unctad.
“For LDCs to transform their economies in the post-pandemic period, they must expand their local enterprise base through investments in productive capacities,” Paul Akiwumi, director of Unctad's division for Africa and LDCs, said.
Mr Akiwumi said LDCs’ domestic efforts need to be supported by a new generation of international support measures that are more closely aligned to LDCs’ expressed needs and 21st century realities, especially in terms of technology transfer.
“A purposeful industrial policy should be at the core of LDCs’ pursuit of green growth and structural transformation,” Mr Akiwumi said, because these countries need to urgently diversify from their overdependence on primary commodities.
Increasing investment in state capacity and productive capacities must be at the heart of the next programme of action for these countries for the decade 2022 to 2031, to be adopted at the Fifth UN Conference on LDCs in January 2022, Mr Akiwumi added.
He also urged LDC governments to adapt programmes negotiated at international level to their specific national conditions.