1、 Financing Sustainable TransformationsFinancing for Sustainable Development Report 2023Inter-agency Task Force on Financing for DevelopmentReport of the Inter-agency Task Force on Financing for DevelopmentFinancing for Sustainable Development Report 2023Financing Sustainable TransformationsThis repo

2、rt is a joint product of the members of the Inter-agency Task Force on Financing for Development.The Financing for Sustainable Development Office of the United Nations Department of Economic and Social Affairs serves as the coordinator and substantive editor of the Financing for Sustainable Developm

3、ent report.The online annex of the Task Force(http:/developmentfinance.un.org)provides additional data and analysis on progress in implementation of the Financing for Development outcomes,including the Addis Ababa Action Agenda and relevant means of implementation targets of the Sustainable Developm

4、ent Goals.Inquiries about the Task Force or its report and online annex can be sent to:Financing for Sustainable Development Office Department of Economic and Social Affairs 2 United Nations Plaza(DC223rd Floor)New York,N.Y.10017 United States of America+1-212-963-4598developmentfinanceun.orghttp:/d

5、evelopmentfinance.un.orgHow to cite this report:United Nations,Inter-agency Task Force on Financing for Development,Financing for Sustainable Development Report 2023:Financing Sustainable Transformations.(New York:United Nations,2023),available from:https:/developmentfinance.un.org/fsdr2023.United N

6、ations publicationSales No.E.23.I.6Print ISBN:978-92-1-101465-5PDF ISBN:978-92-1-002611-6Copyright United Nations,2023All rights reservedThe production of this report and the online annex of the Inter-agency Task Force are generously supported by the Federal Ministry for Economic Cooperation and Dev

7、elopment of Germany.iiiForewordThe 2023 Financing for Sustainable Development Report describes a growing divide between countries that can access affordable financing for development,and those that cannot.Without urgent ambitious action,this gap will translate into a lasting development deficit for

8、many countries and a crisis in global trust and solidarity.The world is fast running out of time to rescue the Sustainable Development Goals(SDGs).The prospect of a world in which everyone can benefit from health care,education and opportunities,decent work,clean air and water and a healthy environm

9、ent is slipping out of reach.The reasons are clear.The COVID-19 pandemic and the unequal recovery hit developing countries hard.Developed countries adopted expansionary fiscal and monetary policies that enabled them to invest in recovery,and have largely returned to pre-pandemic growth paths.But dev

10、eloping countries were unable to do so,in part because their currencies would collapse.Turning to the financial markets,they face interest rates up to 8 times higher than developed countries(LDCs)a debt trap.The climate crisis continues unabated,with a disproportionate impact on least developed coun

11、tries and small island developing States.While developed countries can afford to pay for adaptation and resilience,developing countries cannot.Without urgent action,the climate emergen-cy could overwhelm all efforts to achieve the SDGs.Meanwhile,Russias war in Ukraine has amplified and accelerated a

12、 global cost-of-living crisis,pushing tens of millions more people into extreme poverty and hunger.Tighter global financing conditions have been devastating for countries with high debt levels.Over 40 per cent of people living in extreme poverty live in countries with severe debt challenges.This rep

13、ort shows that without the means to invest in sustainable development and the transformation of their energy and food systems,developing countries are falling even further behind.A two-track world of haves and have-nots holds clear and obvious dangers for every country.We urgently need to rebuild gl

14、obal cooperation and find the solutions to our current crises in multilateral action.As a first step,I have urged the Group of Twenty(G20)to scale up affordable long-term financing for developing countries in need by at least US$500 billion a yeara transformative SDG Stimulus package.This will enabl

15、e all countries to invest in renewable energy,universal social pro-tection,quality education,decent job creation,universal health coverage,sustainable food systems,infrastructure and the digital transformation.The SDG Stimulus aims to address financing needs through a combination of concessional and

16、 non-concessional finance in a mutually reinforc-ing way,reflecting what can and must be done within the current arrangements.Based on current quotas,of the$650 billion in Special Drawing Rights(SDRs)allocated last year,developed countries received about$420 billion,or 66 per cent of the total.Meanw

17、hile,Africa received only 5.2 per cent,or$34 billion,while LDCs received less than$17 billion,or just 2.5 per cent.We must end this injustice and ensure that meaningful SDRs reallocations go to those countries who need it the most,at concessional terms and with minimal conditionalities.Implementing

18、the SDG Stimulus and ending poverty will also require broader changes to the international financial architecture.We will not solve todays challenges by relying on the system that helped to create them.The 2023 Financing for Sustainable Development Report lays bare the ways in which our current syst

19、ems are not fit for purpose.Discussions on reforms of the international financial architecture continue,including within the G20,G7,and the Bridgetown Initiative.It is imperative that the current unsustainable pressures translate into reforms that bring about a coherent,coordinated and more inclusiv

20、e global financial system that fully supports the achievement of the SDGs and the Paris Agreement.The United Nations is the only institution that can convene all countries around these goals,ensuring a full range of views and expertise across economic,social and environmental issues.I urge all Membe

21、r States to use this years High-level Political Forum,SDG Summit,the High-level Dialogue on Financing for Development,the Climate Ambition Summit and the Ministerial Meeting for the Summit of the Future,for construc-tive dialogue,based on the findings in this essential report.Antnio GuterresvPreface

22、 Faced with a confluence of global shocks,the world is regressing on the SDGs.The 2023 World Economic Situation and Prospects projects that in 2023,world output growth will decelerate to only 1.9 per cent,one of the slowest rates of growth in recent decades.Slower growth,high inflation and rising de

23、bt challenges undermine sustainable development prospects and constrain the ability of many developing countries to invest in health,education,infrastructure,and the energy transition.Without urgent action the poorest and most vulnerable will be left even further behind.Both international and domest

24、ic policy efforts are needed to expand financing for the SDGs and climate action,address debt risks,and achieve a sustainable,inclusive,and resilient recovery.The 2023 Financing for Sustainable Devel-opment Report puts forth policy recommendations to address the finance divide and to scale up sustai

25、nable financing and investment,particularly in the most vulnerable countries.Three key messages emerge from this years report:Immediate actions are needed to expand development cooperation and boost investments in the SDGs.Recent global shocks have contributed to unprecedented demands on internation

26、al development cooperation.Mounting sustainable development challenges require bold and new solutions from the international community.Providers of official development assistance must meet their commitments.The scaling-up of lending by multilateral development banks can also increase the availabili

27、ty of concessional resources.The international community should support the Secretary-Generals SDG Stimulus to boost affordable and long-term financing for investments in sustainable development.Gaps in the international financial architecture must be addressed.While some institutional reforms are i

28、n progress,much more still needs to be done,in a timelier and coordinated manner.Efforts to addresses weaknesses in the current architecture must be comprehensive and aligned with the SDGs.Concerted action by all parts of the system is needed to make the international financial system fit for purpos

29、e to deliver sustainable development.The financing for development process at the United Nations provides a platform to bring together different discussions and workstreams to enhance policy effectiveness and coherence.Countries need viable strategies to accelerate sustainable industrial transformat

30、ions.National policies to boost domestic investments in the SDGs are needed for countries to fully benefit from reforms to the global system.Investment incentives to facili-tate the low-carbon transition,aligning tax and fiscal systems with the SDGs,and regulatory measures to boost long-term financi

31、ng for sustainable development can all contribute to sustainable industrial transformations.The United Nations,through the Financing for Development process,is uniquely positioned to move these reforms forward.It brings all stakeholders together on an equal footing,so that all voices and perspective

32、s will be heard.And it can help ensure that these reforms make the international architecture fully aligned with and supportive of the SDGs.Upcoming events,including the SDG Summit and the High-level Dialogue on Financing for Development in September 2023,and the Summit of the Future in September 20

33、24 provide opportunities for such dialogues,and could serve to inform a 4th International Confer-ence on Financing for Development in 2025.The Financing for Sustainable Development Report is produced in collaboration with over 60 agencies of the United Nations system and other international organiza

34、tions.It brings together a wide range of expertise and perspectives to provide recommendations for countries and the international community.The report begins with an assessment of the global macroeconomic context(Chapter I).The thematic chapter(Chapter II)explores how countries can finance sustaina

35、ble industrial transformations through a new generation of sustainable industrial policies,in response to requests included in the outcome of the 2022 ECOSOC Financing for Development Forum.The remainder of the report(Chapters III.A to III.G and IV)discusses progress in the seven action areas of the

36、 Addis Agenda,and on data.Additional material is available on the website of the Task Force(http:/developmentfinance.un.org).Li Junhua Under-Secretary-General for Economic and Social Affairs United Nations Chair of the Inter-agency Task ForceviiContentsForeword iiiPreface vInter-agency Task Force me

37、mbers ixOverview and key messages xiiiI The global economic context and its implications for sustainable development 11.Introduction.12.Outlook and risks for the global economy.23.Policies for a stronger recovery.11II What will it take?Financing sustainable industrial transformation 151.Introduction

38、 and key messages.152.Why now?Sustainable industrial transformation and the SDGs.163.What will it take?Industrial and financing policies for sustainable industrial transformation.23III A Domestic public resources 351.Key messages and recommendations.352.Revenue mobilization trends.363.SDG alignment

39、of tax systems.424.Expenditure and budgeting for the SDGs.435.International tax cooperation.486.Illicit financial flows.51III B Domestic and international private business and finance 591.Key messages and recommendations.592.Private investment and finance for sustainable industrial transformation.60

40、3.Inclusive financial systems.654.Leveraging financial markets for sustainable development.68III C International development cooperation 791.Key messages and recommendations.792.Official development assistance.803.Lending by multilateral development banks.874.Blended finance.905.South-South cooperat

41、ion.926.Climate finance.927.The quality,impact and effectiveness of development cooperation.952023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORTviiiIII D International trade as an enginefor development 1031.Key messages and recommendations.1032.Trade and industrial policy.1033.Trends in international

42、 trade.1054.Current Issues in the multilateral trading system.1125.Strengthening synergies between trade and sustainable development.115III E Debt and debt sustainability 1211.Key messages and recommendations .1212.Overview of global debt trendsdebt dynamics in the context of multiple crises.1223.Ad

43、dressing the crisis.1284.Debt transparency and debt management.1295.Sustainable debt financing and the SDGs.1306.Debt crisis resolution.132III F Addressing systemic issues 1371.Key messages and recommendations .1372.International financial architecture.1383.Financial market regulation for sustainabl

44、e development.1444.Digital finance and digital currencies.1485.Global governance and policy coherence.152III G Science,technology,innovation and capacity building 1591.Key messages and recommendations .1592.Digital finance and financial inclusion.1593.Science,technology and innovation and sustainabl

45、e industrial transformation.1634.Development cooperation and United Nations actions on science,technology and innnovation.170IV Data,monitoring and follow-up 1751.Key messages and recommendations.1752.Data frameworks,measurements and collection.1753.Financing for data and statistics.1814.Accessibili

46、ty,discoverability and innovation.182ixInter-agency Task Force membersTask Force coordinator and substantive editorUnited Nations Department of Economic and Social Affairs(UN/DESA)Financing for development major institutional stakeholdersWorld Bank GroupInternational Monetary Fund(IMF)World Trade Or

47、ganization(WTO)United Nations Conference on Trade and Development(UNCTAD)United Nations Development Programme(UNDP)Regional economic commissionsEconomic and Social Commission for Asia and the Pacific(ESCAP)Economic and Social Commission for Western Asia(ESCWA)Economic Commission for Africa(ECA)Econo

48、mic Commission for Europe(UNECE)Economic Commission for Latin America and the Caribbean(ECLAC)United Nations system and other agencies and officesBasel Committee on Banking Supervision(BCBS)Committee on Payments and Market Infrastructure(CPMI)Financial Stability Board(FSB)Food and Agriculture Organi

49、zation of the United Nations(FAO)Global Environment Facility(GEF)Green Climate Fund(GCF)International Association of Insurance Supervisors(IAIS)International Atomic Energy Agency(IAEA)International Civil Aviation Organization(ICAO)2023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORTxInternational Devel

50、opment Finance Club(IDFC)International Fund for Agricultural Development(IFAD)International Labour Organization(ILO)International Organization for Migration(IOM)International Telecommunication Union(ITU)International Trade Centre(ITC)Joint United Nations Programme on HIV/AIDS(UNAIDS)Office of the Hi

51、gh Commissioner for Human Rights(OHCHR)Office of the High Representative for the Least Developed Countries,Landlocked Developing Countries and Small Island Developing States(OHRLLS)Office of the Secretary-Generals Envoy on YouthOffice of the Special Adviser on Africa(OSAA)Organisation for Economic C

52、o-operation and Development(OECD)Principles for Responsible Investment(PRI)Secretariat of the Convention on Biological Diversity(CBD)South CentreSustainable Energy for All(SE4All)The Convention on International Trade in Endangered Species of Wild Fauna and Flora(CITES)The Global Alliance for Vaccine

53、s and Immunizations(GAVI)UN Capital Development Fund(UNCDF)United Nations Childrens Fund(UNICEF)United Nations Commission on International Trade Law(UNCITRAL)United Nations Convention to Combat Desertification(UNCCD)United Nations Educational,Scientific and Cultural Organization(UNESCO)United Nation

54、s Entity for Gender Equality and the Empowerment of Women(UN Women)United Nations Environment Programme(UNEP)United Nations Forum on Forests(UNFFS)United Nations Framework Convention on Climate Change(UNFCCC)United Nations Global Compact(UNGC)United Nations High Commissioner for Refugees(UNHCR)Unite

55、d Nations Human Settlements Programme(UN-HABITAT)United Nations Industrial Development Organization(UNIDO)United Nations Office for Disaster Risk Reduction(UNISDR)United Nations Office for Project Services(UNOPS)xiUnited Nations Office for South-South Cooperation(UNOSSC)United Nations Office for the

56、 Coordination of Humanitarian Affairs(OCHA)United Nations Office on Drugs and Crime(UNODC)United Nations Population Fund(UNFPA)United Nations Research Institute for Social Development(UNRISD)United Nations Technology Bank for Least Developed Countries(UN Technology Bank)United Nations University(UNU

57、)United Nations World Food Programme(WFP)World Health Organization(WHO)World Intellectual Property Organization(WIPO)INTER-AGENCY TASK FORCE MEMBERSOverview and key messagesxiiiOverview and key messagesGlobal sustainable development prospects continue to diverge.Two years ago,in the midst of the COV

58、ID-19 pandemic,the Inter-agency Task Force warned of a global divergence that could lead to a lost decade for development.By 2022,these risks had materializeda great finance divide was translating into a development divide.Over the past 12 months,the war in Ukraine,sharp increases in food and energy

59、 prices and rapidly tightening financial conditions further exacerbated challenges for many countries,increasing hunger and poverty and revers-ing progress on the Sustainable Development Goals(SDGs).Despite some positive signs,the global macroeconomic outlook remains highly uncertain and particularl

60、y bleak for many of the poorest and most vulnerable countries faced with growing debt service burdens and tight fiscal constraints.Recent banking failures in the United States and Switzerland have once again highlighted gaps in financial regulatory and supervisory sys-tems.In todays extremely challe

61、nging global macroeconomic context,financing and sustainable development prospects are diverging even more sharply.If left unaddressed,the finance divide will translate into a lasting sustainable development divide.SDG financing needs are growing,but development financing is not keeping pace.There i

62、s a continued need for immediate and increased international support for vulnerable countries,including many least developed countries(LDCs),African countries and small island developing States(SIDS).At the same time,low levels of investment,particularly in many developing countries,are entrenching

63、the development divide.Delaying investment in sustainable transformations would put the 2030 Agenda for Sustainable Development and climate targets out of reach and exacerbate financing challenges down the line.Delaying investment in transformation is thus not an option.The multiple crises can short

64、en the time horizons for decisionsby policymakers,investors,businesses and individuals.Yet,the crises once again underline the need for a long-term focus on resilient,sustainable and inclusive develop-ment.Delaying investments would put the 2030 targets out of reach and exacerbate financing and macr

65、oeconomic challenges down the line.Sustainable and productive investments today can transform and diversify economies and enhance resilience to shocks,including inflationary supply-side shocks,tomorrow.As laid out in the 2022 Financing for Sustainable Development Report,such investments also enable

66、countries to mobilize resources over time and better service debt.This is why the 2023 Task Force report focuses on sustainable transformations,including a roadmap for governments,along with changes in the way finance works.Both national and international actions are needed to scale up SDG financing

67、.National and global policy frame-works shape incentives,impact risks and influence financing needs and flows.Recent global shocks have placed enormous pressure on global institutions and governance.Enhancing rele-vant global policy frameworks is critical to enabling progress on financing.However,on

68、 their own,reforms to the international system will not deliver sustainable development.Countries need to chart their own paths to achieve the SDGs.This is embodied in the Addis Ababa Action Agenda and the revitalized global partnership for sustainable development,which gives each country primary re

69、sponsibility for its own development but tasks the international community with providing a condu-cive international enabling environment and support.The series of global shocks and overlapping crises have increased the risk of further geoeconomic fragmenta-tion and raised the urgency for reform.But

70、 they have also led to momentum for reform and calls for rapid institutional change.In the face of a unique confluence of challenges,this report calls on the international community to take advantage of this moment and undertake concerted efforts to finance the xiv2023 FINANCING FOR SUSTAINABLE DEVE

71、LOPMENT REPORTtimely realization of the SDGs through:(i)immediate measures to scale up development cooperation and SDG investments;(ii)strengthening the international financial architecture;and(iii)national actions to accelerate sustainable industrial transformations,including through a new genera-t

72、ion of sustainable industrial policies.First,scale up development cooperation and SDG investmentUrgent action is needed to boost all forms of international development cooperation.Demands on international development cooperation are higher than ever.Climate and debt-vulnerable countries require more

73、 concessional resources.Humanitarian aid and development assistance is needed to curb growing food crises.Climate finance is not keeping pace with the ratcheting impact of climate change.Official development assistance(ODA)providers need to meet their commitments,and all forms of development coopera

74、tion must be scaled up.There is also a need to quickly and adequately support countries in debt distress with the ultimate objective of reducing their debt stock and providing long-term relief.Concerted efforts are needed to scale up investment in the SDGs and climate action.Public and private inves

75、tment remains subdued compared to historical levels,especially in most developing countries.The significant scaling up of investment in the energy transition,a bright spot,has remained concentrated in developed countries and China.This dearth of financing motivated the United Nations Secretary-Gener

76、als call for an SDG Stimulus to significantly increase affordable,long-term financing for development in areas such as infrastructure,education,social protection and sustainable structural transformation.Second,enhance the international financial architectureThe international financial architecture

77、is in flux,as countries seek to remake international organizations,norms,rules and frameworks.The pandemic contributed to the urgency to revitalize the institutional architecture to match the ambitions of the 2030 Agenda.Discussions on reforms of the international architecture are ongoing throughout

78、 the international system,including in informal country groupings,such as the Group of 20(G20),the Group of Seven(G7)and the Bridgetown Initiative.They are on the agenda of the World Bank and International Monetary Fund(IMF)boards,bodies based at the Organisa-tion for Economic Co-operation and Devel

79、opment(OECD),and elsewhere.At the United Nations,they are part of Our Common Agenda discussions as well as the financing for development process.These efforts to remake the institutions and norms of the financial architecture and related issues range across the full set of action areas of the Addis

80、Ababa Action Agenda,including:Creating internationally agreed sustainability norms for private invest-ment and business activities(chapter III.B);Evolving the scale and mission of the development bank system(chap-ter III.C);Setting up a loss and damage fund on climate change after decades of discuss

81、ion(chapter III.C);Urgently improving mechanisms for addressing debt challenges,such as through the Common Framework,state-contingent debt instruments and other mechanisms(chapter III.E);Scaling up and accelerating the channelling of the historic allocation of special drawing rights(SDRs)to countrie

82、s in need,including through IMF funds and development banks(chapter III.F);Rewriting international tax norms,particularly rules for taxing digitalized and globalized business and digital assets(chapter III.A);Intensifying multilateral dialogue on current multilateral rules and agreements on investme

83、nt,trade(chapter III.D)and technology(chapter III.G)to ensure a level playing field,balance national interests and reduce negative spillovers from national policies.These processes hold the potential to arrive at a more coherent and effective international architecture.Discussions and institutional

84、reform processes are ongoing and not complete.They have the potential to close some gaps in the international architecture,align it better with the needs of the twenty-first century,and scale up financing for the SDGs and climate action.However,if they proceed piecemeal,remain partial and do not tak

85、e the SDGs fully into account,the architecture will remain fragmented and not fit for purpose to deliver sustainable development.The financing for development process at the United Nations provides an opportunity to bring these different strands together.In 2023,the Econom-ic and Social Commission(E

86、COSOC)Financing for Development Forum will be followed by the SDG Summit and High-level Dialogue on Financing for Development,with the Summit of the Future and the Biennial Summit to take place in 2024.To make the most of these events,discussions should build on each other as part of one process aim

87、ed at ensuring the coher-enceof reforms,and fully aligningthem with the SDGs and climate action.Third,accelerate national sustainable industrial transformationsReforms to the international architecture and a global invest-ment push must be matched with and supported by coordinated national action.Th

88、e SDG Stimulus will only succeed if national policies reignite investment in the SDGs domestically.They are two sides of the same coin.Countries need to strengthen strategic approaches,including through a new generation of sustainable industrial policies and integrated financing frameworks.Industria

89、lization and structural transformation have been historic engines of growth,job creation and technological advancement.The current revival of industrial policiesa response to the climate crisis,the pandemic,but also geostrategic con-cernsopens a window of opportunity for countries to pursue sustaina

90、ble industrial transformations:to build the domestic productive capabilities to achieve low-carbon transitions and create decent jobs and gender equality,along with productivity and economic growth.On the national level,this includes:A coherent sustainable industrial policy strategy aligned with a c

91、ountrys overall vision.Sustainable industrial policies should be closely linked to national sustainable development strategies,which can be supported by integrated national financing frameworks.They need to be context-specific,responding to a countrys binding constraints and in-stitutional framework

92、s.Integrated planning and financing,e.g.,through integrated national financing frameworks,is essential so that countries will be ready to tap into a revamped and more supportive global system.Building a dynamic domestic business sector.An enabling business environment is no longer sufficient;countri

93、es need to build an enabling xvOVERVIEW AND KEY MESSAGESxvsustainable business environment,which includes investment in infrastructure,macroeconomic stability,overcoming credit constraints and getting carbon prices right to incentivize sustainable behaviour.It also requires targeted policies to supp

94、ort firms and address investment constraints.A more expansive toolkit.Because sustainable industrial transfor-mations need to be directed to the SDGs,they require a more expansive toolkit to create and align incentives for investment in sustainable development.Supporting vulnerable groups that may l

95、ose economic oppor-tunities in transitions.This underscores the importance of universal social protection systems as well as targeted support,training and related initiatives,and a focus on rural areas where many of the poor live.Actions across the Addis Agenda to invest in sustainable industrial tr

96、ansfor-mations can include:Creating investment opportunities,e.g.,in activities critical to the low-carbon transition;Adopting regulatory measures to support development and adoption of technologies;Aligning of tax and fiscal systems with sustainable industrial transforma-tion goals,while increasing

97、 revenue to finance public investment;Combining supply-side instruments such as investment incentives with demand-side strategic public procurement,as well as setting appropriate technology standards to encourage domestic firm development,sustain-able innovation and,ultimately,competitiveness;Using

98、public development banks and other public funds to support basic research and development,early-stage innovation and broader investment in the SDGs;Shaping the private financial sector through regulatory and other mea-sures to encourage long-term financing and aligning it with sustainable developmen

99、t.Many developing countries will need capacity and financial support.The international community can support countries efforts through project-specific support,e.g.,through blended finance instruments well aligned with national priorities,and capacity support.The opportunityThe world is at a crossro

100、ads.The risks are further geoeconomic fragmentation and an erosion of multilateralism and a rules-based order,with the most vulnerable and least powerful countries most affected.The opportunity is to reform and strengthen multilateralism through an international financial architecture that delivers

101、on the ambitious global goals set out in 2015,along with national actions to invest in sustainable transformations.With many systemic reform processes ongoing,the international community needs to deliver on the outstanding promise of the Addis Ababa Action Agenda to create a coherent,mutually suppor

102、ting world trade,monetary and financial system,while updating commitments to reflect the changing world.This report identifies numerous steps that policymakers can take towards building a sustainable and just world.About this reportThe Inter-agency Task Forces 2023 Financing for Sustainable Developm

103、ent Report begins with an assessment of the global macroeconomic context(chapter I).It finds that the global economic outlook remains fragile amid a highly challenging environment,with recent shocks having the biggest impact on the most vulnerable.Task Force members are projecting a slow-down in glo

104、bal growth in 2023,but with a wider forecast range compared to the past.The thematic chapter(chapter II)explores how countries can finance sustainable industrial transformations through a new generation of sustainable industrial policies,responding to requests included in the outcome of the 2022 ECO

105、SOC Financing for Development Forum.Chapter III.A on domestic public resources highlights that tax systems are foundational to building state capacity and the social contract in which taxpayers contribute resources and in return the government provides valuable public goods and services.It assesses

106、progress in national tax policy and administration as well as how to create gender-responsive tax systems.The chapter recommends strengthening public financial management and expenditure alignment with sustainable development,including fiscal tools relevant for sustainable industrial transformations

107、.It also provides updates on international tax cooperation and combating illicit financial flows.Chapter III.B on private business and finance reviews measures to improve:i)the enabling environment for business;and ii)the use of policies and financial instruments to incentivize investment in develop

108、ing countries based on the needs of different types of companies and their contributions to the SDGs.The chapter also discusses measures to make the financial system more sustainable and companies more accountable for their environmental and social impacts.Chapter III.C on international development

109、cooperation includes an update on the impact of the COVID-19 pandemic and the food,fuel and climate crises on ODA and other forms of development cooperation,including multilateral development bank lending and blended finance.It also covers progress on climate finance.The chapter concludes with a dis

110、cussion on the development effectiveness agenda in a changed financial landscape.Chapter III.D on international trade as an engine for development includes an analysis on trade and industrial policy links;trends in international trade,particularly the impact of the war in Ukraine;current issues in t

111、he multilateral trading system,including the landmark fisheries subsidy agreement;and strengthening synergies between trade and sustainable development.Chapter III.E on debt and debt sustainability provides an update on key debt trends and vulnerabilities in the face of difficult global macroeconom-

112、ic circumstances.It addresses policy issues around debt management and transparency;debt financing and fiscal space for SDG investments;and progress in the policy agenda around debt crisis resolution.In Chapter III.F on addressing systemic issues,the Task Force provides updates on implementation of

113、financial regulatory reform and reviews risks to financial stability from the non-bank sector.The chapter further discusses digital currencies,the interrelations between climate change and financial stability,macroeconomic management and crisis response,and institutional and policy coherence for sus

114、tainable development.2023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORTxviChapter III.G on science,technology and innovation complements the thematic chapter in exploring how technologies can contribute to sustain-able industrial transformation.The chapter further discusses several key emerging techn

115、ologies,including updates on financial technology and relevant activities in the United Nations system.In Chapter IV on data and monitoring,the main issues include the latest developments on data frameworks,including the global indicator framework for the SDGs,and beyond GDP metrics;strengthening fi

116、nancing for data and statistics;and data accessibility,discoverability and innovation.The Task Force is made up of more than 60 United Nations agencies,programmes and offices,the regional economic commissions and other relevant international institutions.The report and its online annex draw on their

117、 combined expertise,analysis and data.The major institutional stake-holders of the financing for development processthe World Bank Group,the IMF,the World Trade Organization,the United Nations Conference on Trade and Development and the United Nations Development Pro-grammehave a central role,jointl

118、y with the Financing for Sustainable Development Office of the United Nations Department of Economic and Social Affairs,which also serves as the coordinator of the Task Force and substantive editor of the report.The global economic context and its implications for sustainable developmentChapter I1Th

119、e global economic context and its implications for sustainable development11.IntroductionThe global economic outlook remains fragile amid a highly challenging environment.While some of the clouds looming over the global economy may be lifting,the baseline outlook is subject to a high degree of uncer

120、tainty.Task Force members are projecting a slowdown in global growth in 2023,but with a wider forecast range compared to the past.On a market exchange rate basis,2023 global growth forecasts by Task Force members range from 1.9 per cent to 2.4 per cent,following growth of 3.0 per cent in 2022.Downsi

121、de risks include more persistent-than-expected inflation leading to a wage-price spiral,a sharp and disorderly tightening of global financial conditions and a further escalation of geopolitical tensions.1While inflation is expected to have peaked,monetary policy will remain tight in most countries.T

122、he modera-tion in global commodity prices and Chinas reopening are expected to ease global price pressures going forward.In recent months,weaker-than-expected inflation has driven expecta-tions for a slower pace of monetary tightening,contributing to improvements in global financial conditions.Howev

123、er,headline inflation is expected to remain elevated in many countries,fuelling concerns that inflation expectations could still become de-anchored.In this environment,central banks are likely to maintain tight monetary policy stances.Countries are facing difficult monetary and fiscal policy trade-o

124、ffs.Elevated inflation has prompted central banks across the world to embark on aggressive monetary tightening despite incomplete economic recoveries from the COVID-19 pandemic.The rapid tightening of global financial conditions has also fuelled debt sustainability concerns in a number of developing

125、 countries(see chapter III.E).High borrowing costs will be particularly damaging for countries with already large debt service burdens and foreign currency denominated debt.Public finances of countries that rely heavily on commodity imports have been particularly strained by the increase in food and

126、 energy prices.As fiscal consolidation pressures intensify,there is a risk of significant delays or cutbacks to investment in sustainable development,including in climate action.Moreover,fiscal retrenchment often entails cuts to social expenditure which disproportionately hurts the most vulnerable p

127、opula-tions,including women and children.Recent shocks are threatening to further reverse progress on the Sustainable Development Goals(SDGs),especially for the poorest and most vulnerable coun-tries.The war in Ukraine and the pandemic have reversed years of progress across many areas of sustainable

128、 development,in-cluding poverty,healthcare and education.Some of the worlds most vulnerable countries,including the least developed countries(LDCs)and small island developing States(SIDS),have been the hardest hit by the recent confluence of crises.Many of these economies also face the highest risk

129、of losses and damage due to the increasing frequency and severity of climate-related shocks.The sharp rise in inflation has also caused real wage growth to turn negative in many countries,eroding the purchasing power of households with a stronger impact on low-income groups.Soaring food and energy p

130、rices have pushed tens of millions more people into extreme poverty and acute food insecurity.The highly challenging macroeconomic environment has also not been conducive to productive and sustainable investments,posing a setback to countries pursuit of sustainable and inclusive structural transform

131、ation(see chapter II).As policy space narrows,many developing countries are at risk of falling into a vicious cycle of weak growth,unsus-tainable debt and austerity.Other ongoing structural shifts in 2023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORT2the global landscape,including the accelerated pac

132、e of digitalization and the changing nature of jobs(see chapter II),could exacerbate inequalities,leaving already disadvantaged segments of society further behind.Investment prospects in most developing countries remain weak,raising the risk of deeper and more protracted scarring.Since the onset of

133、the COVID-19 pandemic,many developed economies have announced large fiscal packages,which include increases in public investment,in order to support their economic recoveries.In contrast,developing countries have been more constrained,with many of the poor-est forced to cut spending in areas such as

134、 infrastructure and education.For the developing countries,a prolonged period of subdued investment is exacerbating already large climate and SDG investment gaps.On a national level,governments need to address the immediate needs of vulnerable groups and invest in the SDGs,while preserv-ing fiscal s

135、ustainability.Countries will need to strike a delicate policy balance to rein in inflation without derailing growth.They also need to address the immediate crisis while also investing in long-term productivity and the SDGs.Such investments can create jobs in the near term and lead to a virtuous cycl

136、e of increased growth and tax revenues,while improving long-term debt ratios(see previous Financing for Sustainable Development Reports).Domestic macroeconomic and financial policies should also be better aligned with the SDGs,while considering the growing interlinkages between economic,social and e

137、nvironmental risks.Stronger international cooperation is needed to mitigate the long-term impact of multiple crises and to promote a sustainable recovery.Bold and decisive global policy efforts are needed to address the multitude of challenges faced by developing countries.This includes efforts to b

138、etter manage spillovers from developed country policies,ad-dress looming debt distress risks,boost investment in the SDGs,accelerate climate action and support people affected by crises and hunger.2.Outlook and risks for the global economy2.1 Global and regional growth trends and outlookThe world fa

139、ced a series of severe and mutually reinforcing shocks in 2022,causing the global economic recovery to lose momentum.World output growth slowed from 5.8 per cent in 2021 to 3.0 per cent in 2022.The war in Ukraine triggered a global cost-of-living crisis at a time when most economies were still strug

140、gling to recover from the pandemic.Acute supply disruptions drove up food and energy prices to record levels,impacting the most vulnerable populations the hardest.With global inflation reaching a two-decade high of 9.0 per cent in 2022,most central banks worldwide tightened their monetary policy sta

141、nces in efforts to contain demand-side inflationary pressures.The rapid pace of interest rate hikes by the United States Federal Reserve generated strong spillovers on developing countries,with many experiencing bouts of sizeable capital outflows and currency depreciations during the year.Investor r

142、isk appetite was also dampened by the uncertain growth outlook,persistent inflation and continued geopolitical tensions.The sharp tightening of global financial conditions has increased balance of payment pressures and debt vulnerabilities in many developing countries.By the end of 2022,nearly 60 pe

143、r cent of all low-income countries were at high risk of or in debt distress(see chapter III.E).The global growth momentum is expected to weaken further in 2023 before rebounding modestly in 2024.The United Nations World Economic Situation and Prospects 2023 projects that global growth will decelerat

144、e to 1.9 per cent in 2023(see figure I.1),2 marking one of the lowest growth rates in recent decades.As some of the current global headwinds subside,world output growth is expected to pick up to 2.7 per cent in 2024.The outlook,however,remains highly uncertain,which is reflected in the differences i

145、n growth projections across the Task Force members.While downside risks,such as stubbornly high inflation,remain,there are also upsides to the global growth out-look.These include a more rapid pace of disinflation allowing for less monetary tightening,a more measured slowdown in domestic demand in E

146、urope and the United States(in part due to the mild winter),and a stronger-than-expected recovery in China buoyed by the reopening of the economy.The projected slowdown in global growth in 2023 largely reflects the impact of synchronous monetary policy tightening on demand as well as the economic ef

147、fects of the war in Ukraine.In developed economies,aggregate growth is expected to slow to 0.4 per cent in 2023,from 2.6 per cent in 2022.The United States and Europe are expected to experience slower economic activity as higher interest rates and lower real incomes constrain consumer spending and i

148、nvestment.In several European countries,continued energy supply disruptions will keep gas and electricity prices elevated,reducing the purchasing power of households and raising firms production costs.Source:UN DESA.Note:e=estimates,f=forecasts.Figure I.1Growth of world gross product(Percentage)-6-4

149、-202468Developing economies Developed economiesWorld2024f2023f2022e202120202019THE GLOBAL ECONOMIC CONTEXT AND ITS IMPLICATIONS FOR SUSTAINABLE DEVELOPMENT3large external imbalances,shocks emanating from higher food and energy prices as well as rising interest rates have triggered economic crises in

150、 a few countries,pushing families into hunger and poverty for the first time.In contrast,income per capita in Western Asia has exceeded levels projected before the pandemic as higher-than-expected global oil and gas prices benefited fuel exporters.By country groupings,developed countries experienced

151、 smaller output-per-capita losses in 2022 compared to developing countries(see figure I.2b),due in part to larger fiscal support measures to buffer the impact of the pandemic and cost-of-living crises.In 2023,however,tighter monetary policies and elevated energy prices are expected to have a stronge

152、r impact on growth in the developed countries,resulting in higher output losses compared to developing countries.Importantly,such losses are expected to remain persistently high for the developing countries that were already lagging behind.Many LDCs,landlocked developing countries(LLDCs)and SIDS hav

153、e been impacted by the sharp rise in global commodity prices,given their high dependence on imports of these items.These countries also remain highly susceptible to damage caused by natural disasters and extreme weather events.Country-specific shocks,including economic and political crises,have also

154、 dampened the growth outlook in a few countries.For the SIDS,interna-tional travel has yet to fully recover from the pandemic.Global progress towards poverty eradication has stalled.The pandemic and the war in Ukraine have reversed almost three decades of progress in poverty reduction.A new report b

155、y the World Bank found that in 2020 alone,the global extreme poverty rate rose from 8.4 per cent to 9.3 per cent as the pandemic drove 70 million more people into extreme poverty.6 In 2022,poverty reduction faced a stronger setback amid weaker global growth and elevated inflation.An additional 70 to

156、 89 million people were living in extreme poverty in 2022,compared to pre-pandemic projections.Given current trends,574 million peoplenearly 7 per cent of the worlds populationwill still be living in extreme poverty in 2030.Against this backdrop,global inequality has also risen for the first time in

157、 decades.7 In 2020,income losses of the poorest 40 per cent of the worlds population were double that of the richest 20 per cent.The recovery in global labour markets is at risk given the challeng-ing economic environment.As pandemic-era restrictions were lifted,global hours worked rebounded in 2021

158、 and early 2022(see figureI.3).Amid weakening economic growth and sentiments,however,the recovery subsequently reversed,as reflected in lower vacancies and slowing employment growth in several countries,including the United States.Across countries,differences in the pace of labour market recovery re

159、main large.In most developed countries,employment has reached or surpassed pre-crisis levels with employers facing labour shortages.In contrast,many developing countries have not yet recovered to pre-pandemic levels of hours worked.This is attributed,in part,to the lack of policy support,including j

160、ob retention schemes and wage subsidies to help businesses and workers weather the multiple crises.Elevated inflation will continue to erode the purchasing power of workers,with global real wages falling by 0.9 per cent in the first half of 2022.8 Minimum wage earners will be hit the hardest,while t

161、he number of working poor is expected to increase.The asymmetric impact of recent shocks on labour markets has also worsened inequalities within countries.Recent crises have inflicted stronger and more long-lasting damage on already disadvan-taged groups of workers,including women,youth and low-skil

162、led workers.Recent shocks have had a differentiated impact on countries.Growth in developing countries as a group is expected to be sustained at 3.9 per cent in 2023,but growth prospects vary significantly across regions and countries.Persistently high food and fuel prices will weigh on household ex

163、penditure in all regions to varying degrees.Elevated energy prices are projected to lend support to the economic recovery of energy exporters,including in Western Asia.Tighter global financial conditions and domestic monetary policy stances are expected to have the most pronounced effects on countri

164、es with pre-existing macroeconomic vulnerabilities.Net commodity importers,including many countries in Africa and South Asia,will continue to be affected by elevated global commodity prices.In China,domestic demand is projected to strengthen in 2023,buoyed by the lifting of pandemic restric-tions an

165、d more accommodative policies.While this will benefit many of the East Asian economies,given deep trade and financial linkages with China,the regions trade prospects are dampened by weaker demand from the major developed economies.For many vulnerable developing countries such as the LDCs,recent glob

166、al shocks will greatly exacerbate challenges towards sustainable development.Many of these countries face significant fiscal constraints and rising debt vulnerabilities,hindering their ability to mitigate the impact of shocks on their domestic economies.The global food crisis has hit vulnerable coun

167、tries the hardest.In the aftermath of the COVID-19 pandemic,global food prices were on an upward trend,buoyed by the recovery in global demand,higher prices of fertilizer and fuel,higher transportation costs and supply chain disruptions.In March 2022,global food prices soared to a record high as the

168、 war in Ukraine caused severe disruptions to global food production and distribu-tion.The UN Food and Agriculture Organizations Food Price Index showed that food prices were 50 per cent higher in 2022 compared to 2019.3 Over 90 per cent of developing countries experienced food price inflation of ove

169、r 5 per cent,while a large number of countries in Africa,Latin America and the Caribbean,and South Asia are contending with double-digit food price increases.The number of people facing acute food insecurity has more than doubled compared to pre-pandemic levels,rising from 135 million in 2019 to a p

170、rojected 345 million in 2023.4 Although global food prices have been on a downward trend since the second half of 2022,they remain elevated compared to pre-pandemic levels.Food inflation affects low-income groups the most as up to half of their household expenditure is on food items.In addition to t

171、he devastating impact on human lives,the food crisis also entails large economic costs.In 2022,the world food import bill reached a record high,surpassing$1.94 trillion.For the 48 countries most affected by the war in Ukraine,most of which are low-income countries,higher food and fertilizer prices a

172、re estimated to add$9 billion to their import bills in 2022 and 2023,leading to a sharp deterioration in balance of payment positions.5 International efforts such as the Black Sea Grain Initiative have helped to ease global food supply shortages,while the IMFs new food shock window has eased urgent

173、financing pressures in some of the hardest-hit countries.However,weak global growth,persis-tent conflicts and the intensifying impact of climate shocks will continue to weigh heavily on the global food security outlook.The challenging global growth outlook will continue to set back progress towards

174、higher living standards.In per capita terms,global growth slowed from 5.0 per cent in 2021 to 2.1 per cent in 2022 and is projected to weaken further to 1.0 per cent in 2023.By region,per capita income losses compared to pre-pandemic projections have been the largest in South Asia(see figure I.2a).G

175、iven limited policy buffers and 32023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORT4In 2022,employment in many high-skilled jobs(including managers,professionals and technicians)had already surpassed pre-pandemic levels,but employment in many low-and medium-skilled occupations has yet to recover(see

176、figure I.4).At the same time,informal employment,where workers often lack social protection,has been recovering at a strong pace,particularly in low-and low-middle-income countries.This could jeopardize the trend towards formalization that has been observed over the past 15 years.9 While women exper

177、ienced a stronger rebound in employment following the pandemic,this recovery has been mainly driven by informal employment.In 2022,four out of five jobs created for women were informal.10 Meanwhile,young people continue to face significant challenges in securing decent employment.Youth employment wa

178、s hit particularly hard during the pandemic and its recovery remains far behind that of adults,with more than one in five young people not in education,employment or training.11The worsening effects of climate change pose a major risk to global development prospects.According to the International Di

179、saster Database,12 climate and weather disasters over the last decade were over four times more frequent compared to 50 years ago.Fuelled by rising greenhouse gas concentrations,the past eight years have been the warmest on record.13 Global carbon emissions continued to rise in 2022,exceeding pre-pa

180、ndemic levels.Extreme weather events such as heat waves,floods and droughts have become more frequent and intense,leading to substantial human and economic costs.These costs are dispro-portionately higher for already vulnerable countries,particularly the LDCs and SIDS.The impact of climate-related d

181、isasters has also been pronounced Source:UN DESA.Note:e=estimates,f=forecasts.Figure I.2GDP per capita losses by region and development status(Percentage change between latest and pre-pandemic forecasts)-10.0-8.0-6.0-4.0-2.00.02.04.06.0Latin Americaand the CaribbeanWestern AsiaSouth AsiaEast AsiaAfr

182、ica-9.0-8.0-7.0-6.0-5.0-4.0-3.0-2.0-1.00SIDSLLDCsLDCsDevelopingeconomiesDevelopedeconomies(a)Developing regions(b)Selected country groupings 2022e2023fSource:ILO.Figure I.3Changes in hours worked by country income group(Percentage)-8-6-4-202High-income Upper-middle-income Lower-middle-income Low-inc

183、ome WorldQ3 2022Q2 2022Q1 2022Q4 2021Q3 2021THE GLOBAL ECONOMIC CONTEXT AND ITS IMPLICATIONS FOR SUSTAINABLE DEVELOPMENT5for countries that are reliant on the agriculture sector.Between 2008 and 2018,26 per cent of the overall effects of climate change loss and damages affected the agriculture secto

184、rincluding agriculture,forestry and fishery.Deepening interlinkages between environmental,social and economic challenges highlight the need for comprehensive policy action.For example,the adverse impacts of climate change on economic outlooks have become evident.For the LDCs and SIDS,individual disa

185、sters can amount to multiples of GDP,while the return needed to compensate for the increased exposure to disasters raises their cost of commercial financing.14 Climate shocks also deplete fiscal buffers and exacerbate debt burdens,leading to a higher risk of sovereign debt crises with substantial ec

186、onomic costs.At the same time,economic policy choices can affect environmental and social outcomes.In countries with rising poverty rates,there is a risk that people may be driven towards the use of cheaper but dirtier energy,posing major setbacks to the renewable energy transition.In addition,the d

187、eterioration in economic conditions,such as weakened income and job prospects,has the potential to trigger social unrest.2.2 Monetary and financial stability risksElevated inflation has prompted rapid and synchronous global monetary policy tightening.Global inflation surged to 9.0 per cent in 2022,w

188、ith headline inflation reaching multi-decade highs across regions and countries(see figure I.5).Global inflation has been fuelled by supply shocks,including disruptions to global supply chains and commodity markets,as well as demand pressures,including from earlier policy support measures.To contain

189、 inflationary pressures and anchor price expectations,central banks worldwide have pivoted towards sharply tighter monetary policy stances.In 2022,central banks across the major developed economies hiked interest rates(see figure I.6a),with a main exception being the Bank of Japan.The United States

190、Federal Reserve raised the federal funds rate from near zero to a target range of between 4.254.50 per cent,its highest level in 15 years.The cumulative 425 basis points rate hike also marked its most aggressive pace of monetary tightening since the 1980s.The Federal Reserve also accelerated its pac

191、e of balance sheet reduction,further tightening liquidity conditions.The European Central Bank increased its main refinancing operations rate by a cumulative 250 basis points in 2022 to 3.0 per cent and announced that it would begin to trim its holdings of bonds bought under its Asset Purchase Progr

192、amme from March 2023 onwards.For many developing countries,capital outflows and currency depreciations compounded pressures to raise interest rates.Despite incipient recoveries from the pandemic,central banks in 85 per cent of developing economies hiked policy rates in 2022(see figure I.6b).In addit

193、ion to rising domestic inflation,developing country central banks also had to contend with cross-border spillovers from higher policy rates in the major developed countries.Narrowing interest rate differentials and higher investor risk aversion drove capital outflows and the weakening of domestic cu

194、rrencies,particularly in March 2022 when the Federal Reserve introduced its first policy rate increase in over three years.In October2022,Source:ILO.Figure I.4Employment growth rates by occupation,2Q 2019-2Q 2022 (Percentage)-6-4-2024681012ElementaryoccupationsPlant andmachineoperators andassemblers

195、Craft andrelated tradesworkersSkilledagriculture,forestry andfshery workersServices andsales workersClericalsupportworkersTechniciansand associateprofessionalProfessionalsManagersAverage employment growth=3.2%High-skilledMedium-skilledLow-skilled2023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORT6the

196、United States dollar index rose to its highest level on record in nominal terms,but gradually retreated as the Federal Reserves monetary tightening became less aggressive towards the end of 2022 and into 2023.However,as of 17 February 2023,the index is still 6.6 per cent higher than its 2021 average

197、.The performance of financial markets differed considerably between developing countries as investors scrutinized each countrys fundamentals.Financial markets were subject to stronger pressures in commodity-importing countries,particularly those with inherent structural and policy weaknesses.For man

198、y of these economies,the weakening of domestic currencies against the dollar not only increases the burden of servicing debt denominated in foreign currencies,but also exacerbates challenges caused by higher international prices for food,fuel and fertilizer.In 2022,about one fifth of developing econ

199、omies liquidated more than 15 per cent of their international foreign reserves to cushion the pressure on domestic currencies,with larger losses faced by countries with large macroeconomic imbalances and higher inflation.15As inflation is expected to have peaked in 2022,several central banks have sl

200、owed or paused monetary tightening.The prices of many commodities have softened,while Chinas reopening is expected to ease global supply chain disruptions.However,headline inflation is expect-ed to only moderate gradually and will remain elevated and above central bank targets in the near term.Given

201、 persistent risks to price stability,a few major developed country central banks have stated that policy rates will be kept higher for a longer period of time.Many developing country central banks are also likely to maintain relatively tight monetary policy stances to prevent a de-anchoring of infla

202、tion expectations.The rapid withdrawal of monetary support has helped to rein in inflation,but has contributed to higher financial stability risks.Uncertainty over the magnitude of policy tightening exacerbated already weak investor risk sentiment generating intensified financial pressures for many

203、developing economies.The 25 emerging economies tracked by the Institute of International Finance cumulatively experienced a reversal of non-resident portfolio flows for five consecutive months(see figure I.7)in 2022.Trends,however,were mixed across regions and countries.China experienced large debt

204、outflows,amid COVID-19 restrictions and slowing economic activity.At the same time,several Latin American and Western Asian economies benefited from high global commodity prices,while capi-tal flows to a few other emerging economies were affected by domestic political and policy uncertainties.Tighte

205、r global financial conditions have further constrained the fiscal space of developing countries.The increase in borrowing costs and broad-based strengthening of the dollar have exacerbated debt vul-nerabilities for many developing country governments.In 2022,the local currency bond markets of emergi

206、ng economies saw large net non-resident portfolio outflows,with yields surging to the highest in a decade.16 Between January and November 2022,20 emerging economies(excluding China)collectively experienced outflows of$27.0 billion from local currency non-resident government debt,in contrast to the$2

207、5.6 billion of inflows received in the previous year.17 Hard currency yields of emerging market Source:UN DESA,based on estimates and forecasts produced with the World Economic Forecasting Model.Note:e=estimates,f=forecasts.Data for Latin America and the Caribbean excludes the data for Venezuela(Bol

208、ivarian Republic of).Figure I.5Infation in developing countries and selected country groupings (Percentage)2010-202020212022e2023f051015202530354045SIDSLLDCsLDCsLatin America and the CaribbeanWestern AsiaSouth AsiaEast AsiaAfricaTHE GLOBAL ECONOMIC CONTEXT AND ITS IMPLICATIONS FOR SUSTAINABLE DEVELO

209、PMENT7Source:Institute of International Finance.Figure I.7Non-resident portfolio fows to emerging economies(Billions of United States dollars)Equity fowsDebt fows-20020406080Jan23Oct22Jul22Apr22Jan22Oct21Jul21Apr21Jan21Source:CEIC.Figure I.6Central bank policy rates(Policy rate,percent)United States

210、 Federal ReserveEuropean Central BankBank of EnglandBank of Japan(a)Developed economies-1012345Mar19Jun19Sep19Dec19Mar20Jun20Sep20Dec20Mar21Jun21Sep21Mar22Jun22Sep22Dec21Dec22Source:UN DESA,based on data from CEIC.Note:Based on a sample of 45 developing countries across all regions.Rate cutUnchanged

211、Rate hike(b)Developing countries020406080100 Rate hike Unchanged Rate cut2023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORT8the pandemic,and many of which have seen a steady deterioration of fiscal balances since the 2008 world financial and economic crisis(see figureI.8a).In 2022,most developing reg

212、ions continued to experience large fiscal deficits(see figure I.8b).The rapid tightening of global financial conditions has contrib-uted to an increase in debt service burdens.The increase in global interest rates and strengthening of the dollar have raised the debt service costs of developing count

213、ries,leading to an increase in refinancing and roll-over risks.As interest burdens rise,an increasing share of govern-ment revenues are being devoted towards debt service,reaching about 2 per cent of GDP and 10 per cent of public revenues in 2022 on average.Governments in about a dozen countries,inc

214、luding several large develop-ing economies,were estimated to have spent more than 20 per cent of revenues on interest payments during the year.In Africa,debt servicing sovereign bonds have also increased,with 22 per cent of issuers trading on the secondary market with spreads above 1,000 basis point

215、s and 30 per cent having yields above 10 per cent18(see chapter III.E).Despite recent improvements,financial markets remain suscep-tible to renewed turbulence and stress.Global financial conditions have eased somewhat in recent months as weaker-than-expected inflation drove expectations for a slower

216、 pace of future monetary tightening.19 However,given high uncertainty and a fragile growth outlook,financial stability risks remain elevated(see box I.1).The protracted period of low interest rates since the 2008 world financial and economic crisis incentiv-ized financial risk-taking and investors“s

217、earch for yield”,contributing to the build-up of leverage in financial markets to record highs.However,amid the rapid increase in interest rates and deterioration in investor risk appetite,conditions in leveraged finance markets have deteriorated signifi-cantly.In the United States,corporate credit

218、spreads widened sharply,and leveraged loan issuances dropped to post-global financial crisis lows during 2022.20 A disorderly correction in global financial markets could destabilize domestic financial conditions while exacerbating vulnerabilities in developing countries.In this context,policymakers

219、 can deploy a range of policy tools,including macroprudential and capital flow management measures,to mitigate the effects of large and disruptive capital flows.Clear and transparent communication of monetary policy decisions by the major developed economies can also help to reduce adverse spillover

220、s on developing economies.The increasing presence of financial technology(fintech)in the global financial landscape also presents both opportunities and risks.A case in point is the growing volatility of cryptoassets,which could be a source of systemic risk in the future(see chapter III.F).Central b

221、anks have to strike a delicate policy balance between reining in inflation and preserving growth.Against this backdrop,risks of policy mistakes are high.The rapid and synchronized monetary tightening by major central banks led to a sharp withdrawal of liquidity from markets,generating significant ne

222、gative spillovers on developing countries.An overtightening of monetary policy would drive the world economy into an unnecessarily harsh slowdown.This risk,however,could be mitigated if central banks consider the reciprocal impacts of similar rate hikes by others.The current environment of elevated

223、global inflation has raised discussions over whether central banks should revisit strict inflation targets in order to enhance policy flexibility while ensuring the continued credibility of monetary policy.When doing this,however,clear and effec-tive central bank communication is necessary so that p

224、rice expectations remain well anchored.2.3 Deterioration in public financesSoaring food and energy prices in 2022 drove governments to introduce a range of new fiscal measures to support households and businesses.While pandemic-related stimulus has been gradually withdrawn,many countries rolled out

225、new support measures in response to high inflation.In most countries,the new measures,which included tax cuts,subsidies and cash handouts,amounted to more than 0.5 per cent of GDP.21 In many cases,however,support to households has been insufficiently targeted towards those most in need,leading to wh

226、at some consider unnecessarily high spending and potentially adding to inflation-ary pressures.22 The cost-of-living crisis has exerted further pressure on developing country governments whose budgets were already strained by Box I.1Turbulence in the banking sectorBanking failures in the United Stat

227、es and Switzerland in March 2023 have once again highlighted risks in the financial sector,shortcom-ings in financial institutions risk management practices and potential gaps in in regulatory and supervisory systems.The past several Financing for Sustainable Development Reports warned about the ris

228、k rising interest rates could pose to financial sector stability.Maturity mismatches and leveragewhich are inherent to the financial systemincreased during the prolonged period of low interest rates and the search for yield among investors.How and where these risks would materialize was difficult to

229、 identify.Much of the analysis focused on risks in the non-bank financial sector,where institutions are generally subject to less prudential regulation(see chapter III.F).Though the banks that failed each had unique weaknesses,common factors include inadequacies in both internal risk management and

230、external supervision.Rising interest rates exposed balance sheet weaknesses and triggered depositor withdrawals,cascading into liquidity spillovers across the sector.Policymakers acted decisively to address the financial stability risks,including by dealing on a timely basis with the failing banks a

231、nd enhancing the provision of dollar liquidity to banks and cross-border to other central banks.The recent developments have complicated monetary policy.Central banks are often mandated to maintain both price stability and finan-cial stability.Interest rate hikes in pursuit of the first goal could c

232、ause further instability if not well managed.On the other hand,slowing down or abandoning interest rate hikes could risk de-anchoring inflation expectations.Looking forward,economic growth prospects for developed economies face greater uncertainty and downside risks,which could impact global growth

233、and implementation of the SDGs.While direct contagion to developing country banking sectors from the current financial market stress is not imminent,rising global interest rates have also amplified capital flow volatility and risks(such as those due to currency mismatches,see chapter III.F).It is al

234、so unclear if there are more pockets of risk that will be exposed by ongoing tightening of financial conditions,such as in the non-bank financial sector.THE GLOBAL ECONOMIC CONTEXT AND ITS IMPLICATIONS FOR SUSTAINABLE DEVELOPMENT9on public and publicly guaranteed external debt rose from 3.1 per cent

235、 in 2011 to 10 per cent of government revenues in 2021.For a large number of developing countries,the increase in debt servicing costs is diverting resources away from crisis response and investments towards supporting a sustainable recovery(see chapter III.E).Debt distress risks have risen,particul

236、arly for developing countries that are already in vulnerable situations.In 2022,rising interest rates and import bills pushed several countries into debt default,including a few middle-income countries.Amid volatile investor sentiment and weak revenue prospects,more countries may effectively lose ac

237、cess to international capital markets.The share of low-income countries that are at high risk of or in debt distress has more than doubled,from 27 per cent in 2015 to almost 60 per cent in 2022(see chapter III.E).As fiscal space narrows further,governments are facing increas-ingly difficult trade-of

238、fs in prioritizing competing spending needs.Trade-offs are particularly acute for countries with already elevated debt vulnerabilities and very limited fiscal space.Even in the immediate aftermath of the pandemic,many developing countries were constrained in their ability to effectively manage the h

239、ealth and economic crisis.In 2020 and 2021,total fiscal support of the developed economies amounted to$12,200 per capita,in stark contrast to$410 per capita in the developing economies and a mere$20 per capita in the LDCs.Mounting fiscal pressures will constrain national capacities to invest in sust

240、ainable development,including in the areas of health,education,physical and digital infrastructure,and the energy transition.Nonetheless,fiscal austerity would disproportionately harm the poorest and most vulnerable.As countries face rising fiscal pressures,there is a risk of a widespread shift towa

241、rds fiscal austerity,which would be costly and potentially self-defeating.Fiscal consolidation tends to be associated with lower social spending,disproportionately hurting the most vulnerable.Cuts to fiscal expenditure often entail the scaling down of pro-grammes that benefit women more than men,res

242、ulting in income losses for women,restricting their access to healthcare and education,and increasing unpaid work and time poverty.Such impacts further exacerbate the already dire situation of those who have yet to regain employment due to the fragile economic recovery.In addition,further reductions

243、 to spending on education will inflict more harm on already disadvantaged students,widening learn-ing inequalities.In 2022,the share of education in public budgets declined in low-and lower-middle-income countries,despite students still struggling with significant learning losses due to the pandemic

244、.23 This contrasts with the situation in developed economies where education as a share of government budgets in 2022 exceeded the 2019 level.In many developing countries,the channelling of financial resources towards pandemic response resulted in cuts to other healthcare services,including for the

245、prevention and treatment of infectious diseases such as malaria,cholera,HIV/AIDS and tuberculosis.24 As public finances become increasingly stretched,countries need to generate the fiscal space needed to support the SDGs but not at the expense of the already vulnerable.It is imperative that governme

246、nts do not cut social protection programmes during periods of fiscal consolidation.Pro-growth fiscal measures include raising revenues from windfall taxes on fossil fuels and the removal of inefficient subsidies,and channelling this revenue towards strengthening social protection schemes as well as

247、the provision of essential public goods and services(see chapter III.A).2.4 Weak investment prospectsGlobal investment growth is likely to remain subdued amid rising borrowing costs and high uncertainty.In several developed countries,including the United States,the euro area and Japan,the growth of

248、total 25th-75th percentileMeanMedianFigure I.8Fiscal balances(Percentage of GDP)a)Fiscal balances of developing countries-10-8-6-4-2024620222020201820162014201220102008200620042019202020212022-10-8-6-4-2024Latin Americaand theCaribbeanWesternAsiaSouthAsiaEast AsiaAfricab)Fiscal balances in developin

249、g regionsSource:UN/DESA,based on data from the IMF World Economic Outlook database,October 2022.Note:Regional and country group averages for panel b)are unweighted averages across countries.Median values show similar trends.2023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORT10gross fixed capital forma

250、tion in 2022 was dampened by a contraction in residential and non-residential investment.However,this was partially offset by increased investment in intellectual property products(see figureI.9).Looking ahead,heightened global uncertainty will continue to weigh on private investment in developed ec

251、onomies.However,invest-ment growth in several major economies,including the United States and euro area,will be supported in part by government policies to boost infrastructure and green investments.Weak investment prospects in developing countries follow a widespread slowdown in investment growth o

252、ver the past decade.Foreign direct investment(FDI)in developing countries is also projected to extend its weakness into 2023,25 further hindering capital accumulation.The recent succession of global shocks has disproportionately affected investment flows to the poorest countries,with FDI flows to th

253、e LDCs contracting by 30 per cent in 2022.26 The subdued investment outlook fol-lows a trend of stagnating investment in many developing countries over the past decade.Between 2010 and 2021,gross fixed capital formation in per capita terms stagnated in Africa and declined by almost 20 per cent in La

254、tin America and the Caribbean(see figure I.10).Weak fiscal positions were already a constraint on public investment even prior to recent crises.In the five years before the pandemic,about half of the countries in Latin America and the Caribbean and one third in Africa experienced a decline in public

255、 investment in real terms.Source:UN DESA,based on data from CEIC and EuroStat.Note:Figures are in constant prices.Data for the United Kingdom,euro area,and Japan refers to total investment,data for the United States refers to private investment.Figure I.9Annual investment growth in selected develope

256、d economies,by asset type (Percentage)ResidentialNon-residential constructionMachinery and equipmentTotalIntellectual property products-15-10-505102010-2019202020212022 Q1-Q32010-2019202020212022 Q1-Q32010-2019202020212022 Q1-Q32010-2019202020212022 Q1-Q3United StatesUnited KingdomEuro areaJapanA pr

257、olonged period of subdued investment will dampen pro-ductivity growth,contributing to deeper and more persistent economic scarring.While developed economies were able to roll out large fiscal stimulus packages to support their recoveries from the pandemic-induced recessions,many developing countries

258、 are faced with protracted scarring to potential output,amid larger cumulative investment and output losses.27 Recent overlapping shocks have further exacerbated already wide investment gaps in many developing countries,threatening to further derail progress towards sustainable development.A strong

259、push towards productivity-enhancing structural reforms is needed to mitigate the scarring effects from the pandemic and other recent shocks.These include sustainable industrial and financial policies which are key to boost-ing the necessary public and private investments for countries to progress to

260、wards sustainable and inclusive structural transformation(see chapter II).Countries efforts to bolster energy security drove two compet-ing trends in energy investment,with implications for the green transition.In 2022,investment in clean energy is estimated to have exceeded$1.4 trillion,accounting

261、for almost three quarters of the growth in overall energy investment(see figure I.11).While this is an important step in the right direction,it is still well short of what is required to hit international climate goals.Moreover,the increase in clean energy invest-ment has been concentrated in develo

262、ped economies and China.Excluding China,clean energy spending in developing economies remains stuck at THE GLOBAL ECONOMIC CONTEXT AND ITS IMPLICATIONS FOR SUSTAINABLE DEVELOPMENT11Source:IEA.Note:e=estimate.CCUS refers to carbon capture,utilisation and storage.Figure I.11Annual clean energy investm

263、ent(Billions of United States dollars)02004006008001,0001,2001,4001,600Electric vehiclesLow-carbon fuels and CCUSGrids and storageEnergy efciencyand other end usesNuclearRenewable power2022e202120202019201820172015 levels.The high costs of capital and rising borrowing costs threaten to undercut the

264、economic attractiveness of capital-intensive clean technolo-gies in many developing countries.At the same time,investment in fossil fuels continued to rise in 2022(see figure I.12).Large-scale,rapid actions are needed to avert a climate ca-tastrophe and invest in sustainable and inclusive structural

265、 transformation.Despite growing calls for countries to revisit and strengthen their 2030 climate mitigation targets,progress has been slow Source:UN DESA.Note:Regional averages are population weighted.Figure I.10Gross fxed capital formation per capita in developing regions(Constant United States dol

266、lars,index 2010=100)6080100120140160180200 East Asia Western Asia South Asia Africa Latin America and the Caribbean202120202019201820172016201520142013201220112010Figure I.12Coal supply investment(Billions of United States dollars)0204060801001202022e202120202019Source:IEA.Note:e=estimate.2023 FINAN

267、CING FOR SUSTAINABLE DEVELOPMENT REPORT12and inadequate.28 To achieve these ambitious targets,massive invest-ments are required to accelerate transformations,including in electricity supply,industry,farming,transportation and buildings.Stronger inter-national cooperation,particularly in the areas of

268、 financing as well as the transfer and scaling-up of low-emission technologies,will be crucial.3.Policies for a stronger recoveryBeyond urgent actions in response to the overlapping crises,poli-cymakers must ensure that they do not lose sight of longer-term sustainable development objectives.Proacti

269、ve fiscal policies geared towards promoting inclusive and sustainable industrialization can drive progress across many areas of sustainable development(see chapter II).Financing policies can help to enhance domestic revenue mobilization(see chapter III.A)and increase the private sectors role(see cha

270、pter III.B)in expanding the resources available to support crisis recovery efforts.There needs to be a massive boost in public and private investment geared towards strengthening resilience to shocks and supporting the SDGs,in-cluding in climate action(see chapters III.A,III.B and III.C).Stronger po

271、licy actions by the international community are needed to help vulnerable countries to mitigate the effects of recent shocks and avert a lost decade for sustainable development(see chapters III.C and III.E).The Addis Ababa Action Agenda provides a comprehensive framework for countries to consider po

272、licies that can support a resilient,inclusive and sustainable recovery.The subsequent chapters of this report provide progress updates on the implementation of each of the Addis Agendas action areas.They also lay out the policy options at both the national and international levels for countries to m

273、ake stronger progress towards the SDGs in the context of a highly challenging macroeconomic environment.THE GLOBAL ECONOMIC CONTEXT AND ITS IMPLICATIONS FOR SUSTAINABLE DEVELOPMENT13Endnotes1 This chapter is based on the following reports:World Economic Situation and Prospects 2022;World Economic Ou

274、tlook Update,January 2022:Rising Caseloads,A Disrupted Recovery,and Higher Inflation;World Economic Outlook,October 2021:Recovery during a Pandemic;Trade and Development Report 2021:From Recovery to Resilience:The Development Dimension;and Global Economic Prospects,January 2022.2 The United Nations

275、World Economic Situation and Prospects(WESP)report forecast of 1.9 per cent global growth for 2023 is based on market exchange rates,which is in line with the forecast of the World Banks Global Economic Prospects report.When adjusted to reflect market exchange rates,the IMFs World Economic Outlooks

276、projection is for global output to expand by 2.4 per cent for 2023,which is higher than the WESP.This is due mainly to the WESPs less optimistic growth projections for the United States,the euro area,and China.3 Food and Agricultural Organization of the United Nations(FAO).2022.FAO Food Price Index.

277、Rome:FAO.4 World Food Programme.2023.2023:Another year of extreme jeopardy for those struggling to feed their families.Available at www.wfp.org/global-hunger-crisis 5 Bjrn Rother,Sebastian Sosa,Lukas Kohler,Gaelle Pierre,and others.2022.Tackling the Global Food Crisis:Impact,Policy Response,and the

278、Role of the IMF?IMF Note 2022/004,International Monetary Fund,Washington,DC.6 World Bank.2022.Poverty and Shared Prosperity 2022:Correcting Course.Washington,DC:World Bank7 Ibid.8 International Labour Office(ILO).2022.Global Wage Report 202223.Geneva:ILO,2022.9 ILO.2023.World Employment and Social O

279、utlook:Trends 2023.Geneva:ILO,2023.10 Ibid.11 Ibid.12 International Disaster Database.Available at www.emdat.be.13 World Meteorological Organization.2023.Past eight years confirmed to be the eight warmest on record.Available at https:/public.wmo.int/en/media/press-release/past-eight-years-confirmed-

280、be-eight-warmest-record 14 World Bank.2023.Global Economic Prospects,January 2023.15 Ibid.16 International Monetary Fund.2022.Global Financial Stability Report Navigating the High-Inflation Environment.Washington,DC,October.17 International Monetary Fund.2022.EM Local Currency Bond Holdings Monitor.

281、30 November 2022.Global Markets Analysis:Monetary and Capital Markets.18 International Monetary Fund.2023.Emerging and Frontier Markets Issuance.7 February 2023.Global Markets Analysis:Monetary and Capital Markets.19 International Monetary Fund.2023.World Economic Outlook Update.Washington,DC,Januar

282、y.20 International Monetary Fund.2022.Global Financial Stability Report Navigating the High-Inflation Environment.Washington,DC,October.21 International Monetary Fund(IMF).2022.Fiscal Monitor:Helping People Bounce Back.Washington,DC:IMF,October.22 World Bank.2023.Global Economic Prospects,January 20

283、23.23 United Nations Educational,Scientific and Cultural Organization(UNESCO)and World Bank.2022.Financing for Education Stagnant or Declining Despite Chronic Learning Needs Post-COVID-19.Press release,28 June.Washington,DC:UNESCO and World Bank.24 After declining for many years,the total number of

284、malaria cases increased in 2020 amid disruptions to health services during the pandemic.With a short-age of vaccines,a record number of cholera outbreaks occurred,including in Africa,Western Asia,South Asia and the Caribbean.Sources:World Health Organization.2021.World Malaria Report 2021:Tracking P

285、rogress Against Malaria.Geneva:WHO;World Health Organization.2022.Shortage of Cholera Vaccines Leads to Temporary Suspension of Two-Dose Strategy,As Cases Rise Worldwide.News release,19 October.Geneva:WHO.25 UNCTAD.2023.Global Investment Trends Monitor,No.44.Geneva,January.26 UNCTAD.2023.Global Inve

286、stment Trends Monitor,No.45.Geneva,January.27 World Bank.2021.Global Economic Prospects,January 2021.28 United Nations Environment Programme(2022).Emissions Gap Report 2022:The Closing Window Climate crisis calls for rapid transformation of societies.Nairobi.What will it take?Financing sustainable i

287、ndustrial transformation15Chapter IIWhat will it take?Financing sustainable industrial transformation*1.Introduction and key messages15Scaling up investment in sustainable industrial transformation can be a key to rescuing the SDGs.Indus-trialization and structural transformation have been historic

288、engines of economic and productivity growth,job creation and technological advancementand have laid the foundation for poverty reduction and a sustained mobilization of domestic resources.A vibrant domestic private sector engaged in dy-namic activities has been at the heart of sustained progress and

289、 development in most countries.At the same time,countries policy efforts to spur industrial transformations have a mixed record,not least in their impacts on equity,the environment and sustainable development more broadly;many lessons can be learned from both failures and successes.In response to a

290、series of major shocks and crises,the state of domestic productive capacities has become a central concern of policymakers around the world again.The 2008 world financial and economic crisis,the ongoing climate crisis,the COVID-19 pandemic,and,most recently,the fallout from the war in Ukraine have a

291、ll contributed to a revival of industrial policies.Countries have taken steps to support low-carbon transitions,create decent jobs,promote digitalization and enhance the resilience of their economies to economic and non-economic shocks.Industrial policy measures more than doubled between 2009 and 20

292、19,with much of the growth in developed countries.The revival of industrial policies provides an opportu-nity to achieve sustainable industrial transformations.The SDGs give todays efforts at industrial transformation a de-sired direction:such transformations must be underpinned not only by economic

293、 growth,but by growth that can be sustained over time,is inclusive,creates decent jobs,is environmentally sustainable and supports rapid decarbonization.A new generation of sustainable industrial policies has to reflect these sustainable development priorities.Sustainable industrial transformations

294、require scaled up,coordinated and“targeted”public and private invest-ments.Sustainable transformations require investments by the private sector in innovation,energy transition and other areas,and affordable access to finance to fund these investments.Sustainable transformations also require public

295、investments in sustainable infrastructure,human capital and other public goods to overcome supply side bottlenecks and crowd in private investment,and the fiscal space to maintain such investments.Because sustainable industrial transformations are“directional”,they also require a more expansive tool

296、kit to create and align incentives for sustainable investment:public leadership and coordination to create investment opportunities,for example in activities critical to the low-carbon transition,demand-side or regulatory measures to support development and adoption of desirable technologies,and the

297、 alignment of tax and fiscal systems and all other relevant policy frameworks with the SDGs.Sustainable industrial and financing policies,both national actions and international support,are key to facilitate such transformations.This chapter discusses relevant policy options,with a particular focus

298、on financing policies that are pertinent to the action areas of the Addis Ababa Action Agenda.Several key messages emerge:Countries should have strong ownership over the industrial policy formulation process,and relevant stakeholdersprivate business,labour,civil society and othersshould be involved

299、in inclusive consultation and decision-making processes.Sustainable industrial transformations depend on the buy-in and coordinated actions of many stakeholders;*This chapter has benefited from inputs from many Task Force members.It puts forward ideas for governments to consider;however not all Task

300、 Force members are endorsing all the proposals in the chapter.2023 FINANCING FOR SUSTAINABLE DEVELOPMENT REPORT16 Policymakers need to develop a coherent sustainable industrial policy strategy that is aligned with a countrys overall vision.Sustainable industrial policies should be closely linked to

301、national sustainable de-velopment strategies and plans,which can be supported by integrated national financing frameworks.They need to be context-specific,responding to a countrys binding constraints and institutional frameworks;Countries must provide support to vulnerable groups that may lose econo

302、mic opportunities during industrial transformations.This under-scores the importance of universal social protection systems;To reduce the cost of capital for firms,countries should continue to improve domestic enabling environments(thus reducing investment risks)and financial sectors(to lower the co

303、st of capital domestically),and adopt supportive macroeconomic policies;Public development banks are a major source of long-term financing and can help to address financing gaps for sustainable transforma-tion.They can provide funding for new,smaller or innovative firms,or for priority sectors.Publi

304、c development banks also develop specific expertise and market intelligencethey can fill both knowledge and resource gaps;Investment incentives remain the most prevalent sustainable indus-trial policy instruments and can be complemented by demand-side measures and appropriate technology standards to

305、 spur development and adoption of sustainable production processes.They also need care-ful policy design to manage fiscal impacts and avoid capture by special interests,for example by linking support to success criteria;Many developing countries will need capacity and financial support.The internati

306、onal community can support countries efforts through systemic reforms in the international financial architecture and project-specific support,for example through blended finance instru-ments well aligned with national priorities;Developing countries also need to preserve existing and,in some areas,

307、regain lost policy space to pursue sustainable industrial policies.There are risks of rising fragmentation in the global economy,and to a fair and open trading regime.Efforts to tackle climate change and the SDGs,and recent industrial policy announcements in some major economies,have led to calls to

308、 increase multilateral dialogue and potentially adapt current multilateral rules.An unlevel playing field and the“finance divide”must not undermine the ability of developing countries to achieve sustainable industrial transformations.2.Why now?Sustainable industrial transformation and the SDGs2.1 In

309、dustrialization and structural transformation as a historic engine of developmentHistorically,most countries that have achieved sustained economic development and improvements in living standards have done so through structural transformation.Structural transformation involves the reallocation of ca

310、pital and human resources from low-to high-productivity activities and sectors through economic diversification and strengthening productive linkages in the economy.1 A more diversified economy enables higher per capita incomes,2 lower volatility,poverty reduction and better long-term growth prospec

311、ts.3 The impacts of structural transformation also extend beyond economic growth.They often include increased migration from rural areas to urban centres,usually combined with a reduction in birth rates,greater participation of women in the workforce and deep political and sociocultural changes.Manu

312、facturing sector growth and industrialization have histori-cally been central to structural transformation.Because of several unique properties,manufacturing activities were often at the heart of sustained growth episodes,with structural transformation typically involv-ing a rapid increase in the sh

313、are of industry and a corresponding decline in agriculture in economic activity.4 First,technological advances often origi-nated in the manufacturing sector,and diffused from there to other sectors.Manufacturing firms in developing countries were often able to import and adapt these technologies and

314、 achieve rapid productivity growth even when broader institutional capabilities and skills were still comparatively scarce in their host economies.5 Technological and organizational learning in these firms triggered significant economic and knowledge spillovers to the rest of the economy.Second,many

315、 low-skilled workers found employment in manufacturing,at least until recently.In this,manufactur-ing differs greatly from other high-productivity sectors such as finance;it allowed developing countries to attract investment,import technology and capital goods,and combine it with low-skilled labour.

316、And third,manufacturing products are tradeable,and hence growth is not limited by the small size of domestic markets in many developing countries.6Improvements in agricultural productivity were usually a precon-dition for industrialization.Improvements in agricultural productivity allowed agricultur

317、e to produce food needed to feed urban industrial workers,release labour for employment,supply raw materials to support the industrial sector,including agro-industries,increase exports to pay for industrial investments,and enhance the domestic market for industrial products.7 Today,some agro-industr

318、ies and knowledge-intensive services have proven to be technologically dynamic,with high potential for produc-tivity growth(see boxes 1 and 2),8 while some manufacturing activities have become“commodified”,limiting their potential to support upgrading and learning.9Throughout history,countries have

319、provided targeted support to domestic firms to enter dynamic sectors,with policies evolving over time in response to changes in the global economy.Structural transformation is underpinned by the expansion of productive,technologi-cal and organizational capabilities at the firm and industry level.Fir

320、ms generally acquire these capabilities in the process of production(“learning by doing”),but this learning process is fraught with uncertainty(see box 6).Countries have long provided support for domestic firms,often in specific industries,with a view to shaping comparative advantages.10 The interpr

321、etation and debates around industrial policies have emphasized dif-ferent aspects at different times:the protection of infant industries in the 19th century;structural change and the role of a dynamic manufacturing sector after World War Two;and market failures,technological and orga-nizational lear

322、ning and the industrial policy design to address governance challenges at the end of the 20th and beginning of the 21st centuries.11 The industrial policy toolbox changed accordingly:While protectionist WHAT WILL IT TAKE?FINANCING SUSTAINABLE INDUSTRIAL TRANSFORMATION17trade policies and tariffs wer

323、e the most common tools in earlier phases,low interest loans,financial grants(for example R&D subsidies or invest-ment grants)and trade financing are now more prevalent.12While the industrial policy record is mixed,there are lessons that can be learned from both successes and failures.The contributi

324、ons of industrial policies have often been contested.In part,this is because such policies are difficult to assess due to static costs but dynamic benefits,and also because such policies can be open to corruption and state capture.Recent research,taking advantage of“natural experiments”has,however,c

325、onfirmed positive and long-lasting impacts of historical industrial policies.13 At the same time,there is no shortage of failed interventions,with a mixed policy record overall and significant variations in their impact on sustainability and equity across countries.From these experiences,key policy

326、lessons emerge on both policy design and state-business relations,including the need for:A clear vision with specific objectives and political account-ability:A clear vision must be translated into specific near-and medium-term objectives that tackle clearly defined challenges,and against which poli

327、cies can be assessed and revised if needed;political accountability against such targets has also been important;Context-specific strategies:Industrial transformation is typically a gradual process and leapfrogging is rare.Strategies must identify cur-rent and dynamic comparative advantages and take

328、 into account firms existing capabilities and their potential to learn and acquire additional ones,to avoid policy failures;14 Policy coherence:Many industrial policy strategies become undone because macroeconomic,financing,trade or other policies were not aligned with their objectives;often this is

329、 a symptom of the industrial policy strategy not being consistent with the broader national vision and/or not fully backed by the countrys leadership,which may have competing or conflicting interests.15 If relevant stakeholders do not participate in the policy formulation process,implementation and

330、impact are often limited;Addressing political economy and governance challenges head on:Policymakers need a good understanding of private sector challenges,and hence a close relationship with the business sector;but this relationship also heightens risks of policy or regulatory capture,with temporar

331、y subsidies turning into permanent support for underperforming or uncompetitive firms.16 In some cases,structural transformation policies were discredited and abandoned for decades as a result of misuse of public funds.Policies need to be designed to mitigate against risks of capture;Managing sustai

332、nable development impacts:To ensure that industrial transformations are inclusive and sustainable,proactive policies are needed to support(and compensate)those at risk of being left behind and to ensure environmental sustainability.2.2 The role of industrialization and structural transformation in t

333、he sustainable development agendaStructural transformations and industrial policies have to be sustainable and inclusive.Achieving the SDGs requires rapid 17Box II.1Rural economies and the potential of agro-industryIn the absence of inclusive rural transformation in many least developed countries(LDCs),low-productivity agriculture continues to dominate rural economic activity,and rural poverty rem