Where the Financial and Economic Crisis Does Bite: Impact on the Least Developed Countries

Abstract

This paper looks beyond the comparatively good performance of the large emerging economies that gave rise to the mainstream narrative of decoupling. I discuss the negative economic and social impacts of the financial and economic crisis on the Least Developed Countries that the mainstream narrative hides below the veil of well performing large countries. The negative macroeconomic consequences are directly observed in a reduction of the foreign contribution to capital formation in LDCs and a deceleration of the growth of per capita Gross Domestic Product. Official Development Aid does not offer recourse contracting in real terms in 2011 and falling short by US$ 51 billion over 2008-2011.

The potential implications for human development are important. The paper indicates that Millennium Development Goals (especially in the fields of poverty, child mortality and universal primary education) will be more difficult to attain in the Least Developed Countries.

Keywords: Crisis, Least Developed Countries, official development aid, foreign direct investment

JEL Classification: F37, O11, O19