The COVID-19 pandemic has hit the least developed countries (LDCs) so hard that they will this year register their worst economic performance in 30 years, the UN trade and development agency said in a report on Thursday.

Up to 32 million people in these countries could be pushed into extreme poverty in 2020 due to falling income levels, widespread employment losses, and widening fiscal deficits.

“The pandemic has brutally reminded us of the urgent need to develop productive capacities in LDCs to enable them to achieve structural transformation, reduce exposure to external shocks and build resilience,” said Mukhisa Kituyi, the head of the United Nations Conference on Trade and Development (UNCTAD).

Speaking at a virtual conference, Kituyi said the development of productive capacities in most LDCs has been too slow for them to overcome significant development challenges and shocks like the novel coronavirus.

UNCTAD’s Least Developed Countries Report 2020 said efforts to rebuild the economies of the world’s poorest nations post-pandemic will fall significantly short unless their productive capacities are drastically improved.

The UN agency believes LDCs are the litmus test of the UN’s sustainable development goals: if they are to succeed globally, they will need to be achieved in the LDCs.

An estimated 1.06 billion people live in the 47 LDCs, and despite their sizeable demographic weight, these countries account for less than 1.3% of global GDP.

In 2019, the average GDP per capita in LDCs was only $1,088, compared with a world average of $11,371.

The report forecast that the pandemic will push LDCs to their worst economic performance in 30 years, with falling income levels, widespread employment losses, and widening fiscal deficits.

Progress reversed

The crisis will reverse years of painstaking progress by LDCs in social fields such as poverty reduction, nutrition, and education, the report warned.

The digital revolution has raised hopes of LDCs for leapfrogging – adopting modern systems without going through intermediary steps – but firms in these countries are severely disadvantaged.

“Digital transformation requires technological capability, the acquisition of which takes time, is difficult and costly to acquire.

It is accumulated through production experience during previous industrial revolutions, which have bypassed most LDCs,” the report said.

It said that LDCs can only leverage the digital revolution in the productive sphere if they have industrial policies that reinforce and develop producers’ technological capabilities in all sectors.

The report cited Uganda’s Kayoola Bus initiative as an active industrial policy that has established the domestic production of buses powered mainly by renewable energy to tackle the environmental and health problems of transport-related air pollution.

“This year’s report is a wake-up call to the international community to invest, finance, support, and help LDCs overcome their vulnerabilities, starting from building and improving their productive capacities, a key element of the transformation of their economies,” UNCTAD said.

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