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UNDP Report: Rising Insecurities

UNDP by Victoria Cole, July 27, 2015 Adjust font size:

1.2 Economic Imbalances - Impact on Developing Countries, Least Developed Countries and Fragile States

While developing countries and least developed countries (LDCs) are those that suffer the most from global financial crises and other worldwide challenges, the impact of external factors on developing countries is wide-ranging.

Though the development fund (ODA) from the Organization for Economic Cooperation and Development (OECD) countries has increased over the last two years, very few OECD countries are honoring their historical commitments to foreign aid and the proportion of ODA going to LDCs has also fallen over time. Additionally, stronger banking regulations since the crisis now imply a development financing gap of US$1.5 trillion.

Growth rates for exports in LICs and MICs declined sharply during the financial crisis and have continued to do so after 2011. Four rounds of Quantitative Easing in the U.S. kept the American economy augmented appreciation pressures in emerging markets, harming trade competitiveness. Moreover, the decline of oil prices and the slowdown of global economic growth compounded to hamper the exports of developing countries.

The latest version of the International Monetary Fund's (IMF) World Economic Outlook predicts a long-term slowdown in the growth of high and middle-income economies. Economic growth in high income economies is likely to increase marginally to 1.6% over the next 5 years. Economic growth in emerging market economies is expected to decline from 6.5% to 5.2% over the same period.

This will increase potential risks in LDCs and could also move a number of previously non-fragile countries into the "fragile countries" category, where the inability of governments to provide basic services and goods, coupled with growing unemployment, rising costs of living and increased poverty can aggravate pre-existing levels of violence, conflict, criminality and public unrest.

The global recession is estimated to have threatened $11.6 billion of core spending that would have assisted the world's poorest countries. Countries affected by violence account for 60% of the world's undernourished people, 77% of all children not in primary school, 71% of total child mortality (under five years old), 43% of all people living with HIV/AIDs, and 65% of people without access to safe water.

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