U.N. trade experts warn that developing countries face years of difficulty as the global economy slows down and financial turbulence increases.
The United Nations Trade and Development Conference estimated on Wednesday that interest rates hikes will cost developing countries more than US$800 billion in future lost earnings.
UNCTAD said it expects global growth in 2023 to drop to 2.1% but only if the financial fallout from higher interest rates is contained to the bank runs and bailouts of the first quarter.
Its report called for concerted international action to avert "another lost decade for developing countries."
UNCTAD's projected growth rate is far below the International Monetary Fund's expectation of 2.8% global growth, down from 3.4% in 2022, mainly due to inflation and higher interest rates.
"Annual growth across large parts of the global economy will fall below the performance registered before the pandemic and well below the decade of strong growth before the global financial crisis," UNCTAD said.
'Crushing effect of soaring debt'
UNCTAD said 81 developing countries mainly in Africa, the Americas and Asia – not including China – lost US$241 billion in international reserves in 2022, for an average decline of 7%.
It said they faced a "crushing effect of soaring debt, interest rate hikes, food prices and lack of sufficient liquidity" – along with less money for health care.
More than 20 countries had a drop of more than 10% as borrowing costs, measured in sovereign bond yields, rose 5.3% to 8.5% for 68 emerging markets.
In response, the U.N. agency advises greater liquidity, stronger regulations and global finance reforms to support developing countries.
"Over the last decade, debt servicing costs have consistently increased relative to public expenditure on essential services," it said. "The number of countries spending more on external public debt service than health care increased from 34 to 62 during this period."
