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Quick Takes

Financial Flows to Developing Economies Are Shrinking

Financial flows to low- and middle-income countries decreased by an average of 29% in 2018, according to the newly released World Bank International Debt Statistics 2020 report.

This is indicative of “general concerns about a slowdown” in the growth of the world economy along with the political risks and trade pressures that have had ripple effects globally. Another contributing factor may be the high levels of debt that have accumulated in some countries due to unsustainable borrowing from international markets. 

“Sustainable borrowing is an important tool for economic growth and poverty eradication. It boosts countries’ capacity for long-term financing to invest in infrastructure, education, employment, and health,” according to the report’s authors. 

But the levels of debt carried by some of these countries warrant concern: “For both borrowers and creditors to safeguard debt sustainability, and for governments to design effective macroeconomic policies, debt transparency is critical.”

Demand for Precious Metals Is Expected to Drop As Economy Recovers

Source: World Bank, World Gold Council

The value of gold reached an all-time high of $2,067 per ounce in August 2020. At the beginning of the COVID-19 pandemic, gold “benefited from its status as a safe-haven asset and was buoyed by continued monetary easing by major central banks,” according to the World Bank. However, due to some initial signs of economic recovery, the demand for gold has started to decline, with its value seeing a corresponding drop. 

Other precious metals have seen price fluctuations since the start of the pandemic: The cost of silver reached a seven-year high of $29 per ounce in August 2020, but has since declined. In contrast, the cost of platinum dropped in April 2020, but has recovered slightly due to the rise of global auto sales and its use in that sector. 

Although the costs of precious metals dropped at the end of 2020, they have remained higher compared to 2019. Experts anticipate demand for precious metals continuing to decline in 2021 as the economy pursues its recovery. 

Demand for Coal Remains Resilient in Asian Countries

Source: IEA

Global coal demand fell 5% in 2020 — the biggest decline since World War II. Europe and the U.S. saw significant declines in demand, but demand for coal in Asia remained steady, according to the International Energy Agency. 

Transitioning to renewable energy sources, a major drop in electricity use due to COVID-19 lockdowns and lower natural gas prices all contributed to declining demand for coal in 2020. Whereas demand for coal fell by over 15% in North America and Europe, IEA expects China’s coal use to have declined by less than 1% for 2020. China and other Southeast Asian countries combined account for about 75% of global coal demand. 

Despite the negative impact that coal use has on global climate goals, the IEA expects the industry to rebound in 2021 — depending on electricity demand and industrial output post-pandemic. Driven by China, India and Southeast Asia, coal consumption is expected to rise by 2.6% this year.

Cost of Solar Electricity Plummeted in the Last Decade

Source: OurWorldinData.org

Electricity prices are expressed in ‘levelized costs of energy’ (LCOE). LCOE captures the cost of building the power plant itself as well as the ongoing costs for fuel and operating the power plant over its lifetime.

The price of solar electricity dropped by 89% in the last 10 years, becoming the world’s cheapest source of electricity. A learning curve related to the sector’s technology, involving “innovation that reduce[d] the amount of labor, time, energy, and raw materials needed to produce the technology,” resulted in a steep decline in its cost, according to author Ramez Naam. Offshore wind power saw a similar technology learning curve with prices falling by 70%. 

The price of electricity from coal has remained nearly the same, dropping only by $2 per MWh to $109 over the last 10 years. The costs of electricity from wind and solar are now significantly lower than electricity from coal at $41 and $40 per MWh, respectively. 

Increased use of solar and wind electricity would lead to more jobs, lower prices for consumers and a more sustainable environment. “The more renewable energy technologies we deploy, the more their costs will fall. More growth will mean even more growth,” wrote Our World in Data.

Asia-Pacific Embraces AI, While Other Countries Remain Wary

Source: Pew Research Center

More than half of the 20 countries surveyed believe that artificial intelligence brings value to their society, compared to 33%, which believe the technology creates a negative impact. This survey, by Pew Research Center, finds that less than half of the countries surveyed saw this technology having a positive impact on society in terms of job automation.

Views of AI were especially positive in the Asia-Pacific region, with 72% of the public in Singapore and 69% in South Korea seeing it as a good thing for their countries. Not surprisingly so, as many countries in this region have dominated the field of AI. For example, South Korea has the highest robots-to-human workers ratio in the nation, followed by Singapore. Singapore has also expressed a goal of becoming the world’s first “smart nation.” 

The COVID-19 pandemic has accelerated the use of AI technologies. Half of global businesses have increased the speed of incorporating automating tasks in their workday, while many executives see this technology as a key lever for success in 2021.

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