By using ECSS site, you agree to the Privacy Policy and Terms of Use.
Accept
ECSS - Egyptian Center for Strategic StudiesECSS - Egyptian Center for Strategic Studies
  • Home
  • International Relations
    International Relations
    Show More
    Top News
    A Conflict-free Africa: Silencing the Guns and Owning the Future
    June 14, 2020
    Isolationism and Infiltrating Society: The Brotherhood’s Dual Presence in the UK
    February 15, 2021
    The New Reality in Afghanistan: The US in Search of a New Strategy
    September 7, 2021
    Latest News
    Will India Grow into a Rising Asian Tiger?
    February 7, 2023
    Growing Engagement: Rivalry of Major Asian Powers in Africa
    February 5, 2023
    Looking West: India’s Strategy and Relations with Egypt
    February 4, 2023
    Messages from the Polisario Front’s 16th Congress
    February 1, 2023
  • Defense & Security
    Defense & Security
    Show More
    Top News
    Trump’s war on TikTok
    September 1, 2020
    الضربة الأولى: انطلاق الاجتياح الروسي لأوكرانيا
    The First Strike: Russia Storms Ukraine
    February 27, 2022
    Strategic Shift: Iran’s role in Sanaa between Proxy Management and Direct Involvement
    November 7, 2020
    Latest News
    Reasons and Ramifications of Al-Shabaab’s Retreat from its Positions
    January 30, 2023
    Task Force 59: The New US Military Deployment Pattern in the Middle East
    November 30, 2022
    The Future of Relations between Al-Qaeda, Taliban and Islamic State After Al-Zawahiri’s Death
    August 27, 2022
    Israel’s Cyber ​​Dome: Hallmarks and Motives
    August 15, 2022
  • Public Policy
    Public Policy
    Show More
    Top News
    The Oil Market in the Shadow of Coronavirus: The Current Situation and Future Prospects
    September 10, 2020
    The New Administrative Capital: Egypt’s Promising Future
    October 6, 2021
    Accelerating Development: Maximizing the Role of the Private Sector
    September 19, 2022
    Latest News
    How will Forward Exchange Contracts Affect Egypt’s Market Stability?
    January 24, 2023
    Egypt’s Economic Gains from COP27
    December 14, 2022
    Global Crisis: Whither Inflation?
    December 8, 2022
    Climate Finance: Financial Resources and Investments to Address Climate Change
    December 4, 2022
  • Analysis
    • Analysis
    • Analytical article
    • Opinions Articles
  • Activities
    • Conferences
    • ECSS Agenda
    • Panel Discussion
    • Seminar
    • Workshops
  • ECSS Library
    • Books
    • Digital Editions
    • Periodicals
    • Special Editions
  • العربية
  • Advertise
All Rights Reserved to ECSS © 2022,
Reading: Challenges to World Development in 2022
Share
Notification Show More
Latest News
Will India Grow into a Rising Asian Tiger?
International Relations
Strategic Assessment for Israel 2023
Opinions Articles
Growing Engagement: Rivalry of Major Asian Powers in Africa
International Relations
Looking West: India’s Strategy and Relations with Egypt
International Relations
Messages from the Polisario Front’s 16th Congress
International Relations
Aa
ECSS - Egyptian Center for Strategic StudiesECSS - Egyptian Center for Strategic Studies
Aa
  • اللغة العربية
  • International Relations
  • Defense & Security
  • Special Edition
  • Public Policy
  • Analysis
  • Activities & Events
  • Home
  • اللغة العربية
  • Categories
    • International Relations
    • Defense & Security
    • Public Policy
    • Analysis
    • Special Edition
    • Activities & Events
    • Opinions Articles
  • Bookmarks
Follow US
  • Advertise
All Rights Reserved to ECSS © 2022, Powered by EgyptYo Business Services.
Public Policy

Challenges to World Development in 2022

Sally Ashour
Last updated: 2022/11/02 at 10:10 PM
Sally Ashour
Share
7 Min Read
SHARE

The World Bank has released its latest report on world development entitled “World Development Report 2022: Finance for an Equitable Recovery”, which looks into the central role of financing in the economic recovery from the Covid-19 pandemic which gave rise to the greatest economic crisis the world has witnessed in over a century. 

Contents
Figure 1: Loss of income by country income groupFigure 2: Changes in non-performing loan ratios, by country income group, 2020-2021Figure 3: Quarterly trends in credit conditions, by country income group, 2018-2021Figure 4: Change in general government gross debt, by country income group, 2010-2020

In 2020, about 90 percent of countries recorded a contraction in economic activity by about three percent, the global poverty rate soared, and governments adopted policies that would mitigate the economic consequences of the pandemic. However, governments’ responses brought about several economic vulnerabilities. The development report sheds light on four of the pressing risks arising from the pandemic, including the mounting non-performing loans, the delayed settlement of critical loans, credit crunch, and higher sovereign debt. 

I- Covid-19 and Emerging Economic Risks to Recovery

The Covid-19 pandemic has had knock-on effects on all economies, which prompted governments to launch economic programs that have proved effective in the short term. Nevertheless, this emergency response by governments gave rise to new risks, including the public and private over-indebtedness and a global rise in poverty and inequality rates, with greater income losses among youth, women, and the self-employed and seasonal employment of low-educated workers. Women were particularly affected by the loss of income and employment because they were more likely to be employed in sectors that were more affected by lockdown and social distancing measures.

Data indicates that more than 50 percent of households in emerging and advanced economies have not been able to sustain basic consumption for more than three months in the event of income losses. Figure 1 shows income losses during the pandemic by country income group.

Figure 1: Loss of income by country income group

Similar patterns of income loss exist among businesses. Smaller businesses, informal businesses, and businesses with limited access to the formal credit market have been severely affected by income losses caused by the pandemic. Larger firms, though, have weathered the crisis as they had the ability to cover their expenses for up to 65 days, compared to 59, 53, and 50 days for medium-sized, small, microenterprises businesses, respectively.

II- Covid-19 and Risks Facing Bank Balance Sheets

The pandemic affected debt repayment rates, with banks recording the highest rates of repayment deferrals as part of the measures introduced to alleviate the direct economic pressure that households and firms have come under during the pandemic. The following figure shows the changes in non-performing loan ratios, by country income group, over the years 2020-2021.

Figure 2: Changes in non-performing loan ratios, by country income group, 2020-2021

III- Restructuring Firm and Household Debt

According to the World Bank data, in countries with a normal bankruptcy system, it takes an average of more than two years to resolve a company’s bankruptcy case. Complex liquidations may take longer in case of an increase in over-indebtedness, even with efficient judiciary. Amid absence of effective legal mechanisms to declare bankruptcy or resolve creditor-debtor disputes, political interference in the credit market may be required. As such, improving the institutional capacity to manage insolvency becomes critical for equitable economic recovery for several reasons pertaining to the increased access to credit, faster creditor recovery, stronger job preservation, higher productivity, and lower failure rates for small businesses.

IV- Lending during Recovery and Beyond

The ongoing impact of the Covid-19 on business performance and household incomes could inhibit new lending because of the increased credit risk. However, credit can be kept flowing by better visibility into borrower viability and improved recourse in the event of default, along with innovations in digital finance and reassessment of credit models to take into account the “new post-pandemic normal”. Additionally, regulatory frameworks that enable innovation can support credit in the recovery period while ensuring consumer and market protections.

Figure 3: Quarterly trends in credit conditions, by country income group, 2018-2021

V- Managing Sovereign Debt 

Covid-19 forced emerging and developing economies to expand their sovereign debt to record highs in an effort to mitigate the economic consequences of the crisis on households and their local economies. This contributed to an increase in the average total debt burdens among low- and middle-income countries by about nine percent of GDP during 2020, relative to an annual increase of 1.9 percent of GDP per year over the previous decade as is shown in figure 4.

Figure 4: Change in general government gross debt, by country income group, 2010-2020

The accumulation of sovereign debt poses significant risks to the global economic recovery, as debt-ridden governments fail to spend on public utilities, such as education and health care services, which would aggravate inequality and the human development outcomes. Further, countries in debt distress have limited capacities to deal with future shocks and may be unable to become the lender of last resort to private sector firms in need of public assistance.

In short, the Covid-19 crisis has exacerbated the economic risks facing countries. However, it offers a great opportunity to accelerate the shift towards a more efficient and sustainable global economy. In addition to the pandemic, there is climate change, a global phenomenon that has more severe impacts on low-income countries by exacerbating the existing vulnerabilities in these countries, such as the lack of access to clean water, low crop yields, food insecurity, and unsafe housing.

Related Posts

Messages from the Polisario Front’s 16th Congress

A Trump Card: Morocco Maximizes Benefit from Phosphate Amid Ukraine War

Reasons and Ramifications of Al-Shabaab’s Retreat from its Positions

How will Forward Exchange Contracts Affect Egypt’s Market Stability?

TAGGED: COVID-19, Development, Featured, risks, World
Sally Ashour April 5, 2022
Share this Article
Facebook Twitter Whatsapp Whatsapp LinkedIn Telegram Email Copy Link Print

Stay Connected

Facebook Like
Twitter Follow
Instagram Follow
Youtube Subscribe

Latest Articles

Real Estate Transaction Tax: Addressing Challenges of Egypt’s Real Estate Sector
Public Policy March 24, 2022
تعدد المحاور: قراءة في تحولات السياسة الخارجية التركية
Reading into Turkey’s Foreign Policy Shifts
International Relations August 23, 2022
GERD: Bogged down Negotiations and Alternatives
Analysis June 15, 2020
Economics of food security in Egypt
Public Policy April 17, 2021

Latest Tweets

International Relations

  • African Studies
  • American Studies
  • Arab & Regional Studies
  • Asian Studies
  • European Studies
  • Palestinian & Israeli Studies

Defence & Security

  • Armament
  • Cyber Security
  • Extremism
  • Terrorism & Armed Conflict

Public Policies

  • Development & Society
  • Economic & Energy Studies
  • Egypt & World Stats
  • Media Studies
  • Public Opinion
  • Women & Family Studies

The Egyptian Center for Strategic Studies is an independent non-profit think tank, providing decisions-makers by Policy alternatives, the center was establised in 2018 and comprises a group of experts and researchers from diffrent generations and scientific desciplines. 

All Rights Reserved to Egyptian Center for Strategic Studies - ECSS © 2022

Removed from reading list

Undo
Welcome Back!

Sign in to your account

Lost your password?