Slow growth, high debt taking heavy toll on developing nations: UN

Poorer nations are increasingly struggling to navigate the sluggish global economy, the UN warned on Tuesday, calling for a fundamental rethinking of development strategies.

A report from the United Nations' trade and development agency UNCTAD highlighted how slow growth, soaring debt burdens, and weak investment and trade, were holding back developing countries and widening the economic chasm with wealthier nations.

The report, entitled "Rethinking development in the age of discontent", called for new policies and multilateral support to help developing countries overcome their challenges.

"Developing countries are taking a big impact after the pandemic and the cascading crisis that followed," UNCTAD chief Rebeca Grynspan told reporters.

In the foreword to the report, she warned that "although some developing economies show promising growth, the overall picture in the global South is one of weak growth, growing exposure to global shocks and the risk of trade fragmentation".

The agency emphasised the emergence of a new "low normal" in global economic growth, with global GDP expected to rise just 2.7 per cent this year and in 2025, down from an annual average of 3.0 per cent between 2011 and 2019.

This stands in "stark contrast" to the 4.4 per cent average growth seen between 2004 and 2007 ahead of the global financial crisis, it said.

And for developing countries, the slowdown is more dramatic, the report showed.

After growing 6.6 per cent on average annually between 2003 and 2013, their average growth has fallen to just 4.1 per cent in the past decade, it said.

And if China is excluded, growth in the Global South averaged only 2.8 per cent since 2014.

At the same time, developing countries saw their debt burdens balloon by 70 per cent between 2010 and 2023.

This, UNCTAD warned, was heightening "the risk of a return to austerity as a policy guideline", which it stressed could undermine progress towards inclusive development.

"In many ways, the world is seeing a further deterioration of the sluggish 'new normal' growth that followed the global financial crisis over 15 years ago," Grynspan said.

The report also cautioned that post-pandemic inflation, driven by supply chain disruptions and concentrated market power in key sectors like agriculture and energy, had significantly eroded purchasing power in developing countries especially.

"This has fed into social discontent," UNCTAD said, warning against relying solely on monetary tightening to address the problem.

It called instead on a policy mix, including fiscal and regulatory strategies.