02 | THE OUTLOOK – ECONOMIC OUTLOOK
to help reduce those fragilities, manage shocks, plan for risks and understand the driving forces in order to ensure positive development outcomes are delivered for partner countries. Taking the above four fragilities into account — how will the uncertain outlook affect development in OPEC Fund partner countries? There are several important issues to consider, chief among them geopolitical developments. While it is too early to predict detailed moves, a fresh wave of disruptions to global supply chains would result from a return to trade barriers aiming to protect the do- mestic industries of major countries. The US administra- tion seeks to address disruptions via diversifying supply chains, strengthening domestic capacity, and monitoring supply-chain health and resilience 5 . Additional restrictions on investment and the flow of capital would be damaging to global growth prospects. For example, the World Investment Report 2023 6 by the United Nations Conference on Trade and Development reveals a widening annual investment deficit that devel- oping countries face as they work to achieve the Sus- tainable Development Goals (SDGs) by 2030 — the gap is now about US$4 trillion per year — up from US$2.5 trillion in 2015 when the SDGs were adopted. Another issue that is becoming increasingly pressing for a growing number of OPEC Fund partner countries is the low-income countries (LICs) debt crisis. Despite the post-COVID-19 economic growth rebound from 2020 and much higher-than-expected inflation, public debt
has remained stubbornly high, particularly in vulnerable countries. The reasons for this include large, sustained fiscal deficits and price subsidies. There are also external pressures: rising US interest rates have increased new borrowing costs, strained fiscal balance, and raised de- fault risks. Meanwhile, the G20 Common Framework has not been able to provide a blanket solution. The debt problem in LICs is growing (while, positively, it may be receding for middle-income countries as US bond yields decline and global commodity prices fall) and could potentially worsen in 2024. The uncer- tainties around the implementation of the common framework may limit the policy options that LICs have to tackle debt pressures. Meanwhile, constraints within the IMF-World Bank’s debt sustainability framework suggest that as the financing landscape for most LICs has changed significantly since a 2017 review, a compre- hensive overhaul of the framework is required to help prevent the crisis from worsening 7 . 1 https://unfccc.int 2 https://www.imf.org/en/Blogs/Articles/2023/09/13/global-debt-is-return- ing-to-its-rising-trend 3 https://carnegieendowment.org/2023/09/12/rules-of-order-assessing-state- of-global-governance-pub-90517 4 https://blogs.worldbank.org/trade/globalization-retreat-here-what-new- study-shows 5 https://www.whitehouse.gov/cea/written-materials/2023/11/30/is- sue-brief-supply-chain-resilience/ 6 https://unctad.org/publication/world-investment-report-2023 7 https://www.brookings.edu/articles/to-fix-the-debt-crisis-in-low-income- countries-first-fix-the-debt-sustainability-framework/
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