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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.”

Spain’s Supply of Rental Homes Jumped 52% in One Year

Source: Brookings Institution

Spain now has one of the lowest rentership rates compared to European countries, with 23% of households renting their homes. Around 70 years ago, renters made up half of the housing market, according to Brookings Institution. Now, of the 18.6 million households in Spain, fewer than one in four contain renters.

Over the last 20 years, the number of renters in Spain had actually been gradually increasing due to job insecurity and caution around banks granting mortgages. But the COVID-19 pandemic caused rental prices to drop significantly — marking the first drop since the 2009 financial crisis. Brookings states that “the supply of rental homes in Spain increased 52% ​​between September 2019 and September 2020.” 

Similar to other countries, Spain saw a loss of interest in renting during the pandemic — reflecting a decline in tourism and people’s growing desire to relocate to cheaper areas and have more space. The Spanish government responded with policies for “mortgage payment moratoriums, rental assistance and the suspension of evictions for vulnerable families,” notes Brookings.

Digital Exhaustion Threatens the New Hybrid Workplace

Source: Microsoft Work Trend Index survey

Time spent in meetings and chats per person spiked in 2020 and continues to grow. The number of meetings hosted in Microsoft Teams more than doubled — up 148% — as of February 2021, compared to the same time last year. Email communications to commercial and education customers also increased to 40.6 billion, compared to 12.4 billion at the start of COVID-19, according to the Microsoft Work Trend Index.

Many employees reported experiencing digital exhaustion — with 54% of survey respondents feeling overworked and 39% feeling exhausted. “The shared vulnerability of this time has given us a huge opportunity to bring real authenticity to company culture,” Microsoft employee, Jared Spataro says. When employees feel they can bring their whole selves to work, it can actually spur productivity and attract talent, according to Microsoft.

Moving forward, Microsoft recommends five strategies to help business leaders successfully shift to hybrid work: promote flexibility, invest in space and technology, prioritize addressing digital exhaustion from the top, rebuild social capital and culture and rethink employee experience to attract top and diverse talent.

Foreign Aid Is at a Record Peak, But Is It Enough?

Source: Organization for Economic Co-operation and Development (OECD)

Foreign aid rose to an all-time high of $161.2 billion last year, a 3.5% increase from 2019. In many cases, larger economies directed these funds to countries in need of significant help to respond to the short-term impacts from the COVID-19 pandemic, according to the OECD. 

An OECD survey shows that the foreign aid supported health systems, humanitarian aid and food security. However, OECD Secretary-General Angel Gurría added that there will need to be “a much greater effort to help developing countries with vaccine distribution … to build a truly global recovery.” 

Internationally, governments approved $16 trillion worth of COVID-19 stimulus measures, but only 1% was used to help developing countries handle the virus. Trade, foreign direct investment and remittances in developing countries have also declined as a result of the pandemic, intensifying their need for support.

Why Are Central Banks Creating Digital Currencies?

Source: Atlantic Council

Nineteen countries have started to test a central bank digital currency (CBDC) on a small-scale with a limited number of participants. The Atlantic Council defines CBDC as “the digital form of a country’s fiat currency that is also a claim on the central bank.”

As of today, the People’s Bank of China (PBOC) and the European Central Bank (ECB) are prominent players in the digital currency realm. The United States currently lags behind in the research phase, yet the Federal Reserve has expressed continued interest in the digital dollar.

As digital currencies expand globally, there are challenges ahead — the legal, political and regulatory properties of CBDCs remain unclear. But the IMF notes that there are also multiple benefits to having government involvement in digital currencies, including lower cash transfer costs, greater accessibility to banking services and easier implementation of monetary policies. 

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