Suffering from a series of continuous and persistent calamities over the past two years, it’s evident that global economies have suffered a blow. Currently, many primary economies plummet like waterfalls. Continents such as Asia and Africa lack availability of and access to financial technology. The question is, “What are the causes of these disruptive collapses?”
The prime cause of economic collapse is the COVID-19 pandemic. The major lockdowns have caused unemployment and supply side shocks.
Among reporting economies in Asia and the Pacific, referring to the forty six developed and three developing Asian Development Bank member economies, only one in four posted some relative economic growth during the coronavirus pandemic.
The Chinese economy has significantly slowed due to multiple lockdowns,particularly in key manufacturing hubs. This also deprecated the growth rate of economies dependent on China for trade, COU like Thailand and Malaysia.
Many economies in Asia also lacked the institutional capacity to deliver relief to people and businesses during the pandemic. It was challenging enough for developed countries that used banks, tax administrations and social welfare agencies to distribute relief.
However, emerging economies having an extremely large number of unbanked people – 66% in Indonesia and 77% in Philippines – narrow tax bases and limited social welfare had to resort to distributive measures.
The covid pandemic affected the continent of Africa just as bad, if not worse. The African Development Bank estimated that economic growth in the continent shrank by 2.1% in 2020.
The effect on economies was in respect to key-natural resources dependency. Among oil-exporting countries, Libya was hit hardest followed by Equatorial Guinea and Algeria. Among metal and mineral-dependent economies, that of Botswana was estimated to have fallen by 8.9%.
The Mauritian economy faced the worst fall of all tourism-centric economies. The large exchange rate depreciations and heightened inflation rates in Africa could notably be the result of disruptions in external financial flows, including remittances, foreign direct investment and portfolio investment.
A significant cause of the downfall is the Russia-Ukraine war that began in February 2022.
The gruelling warfare has caused economic spillovers primarily in 6 areas; global commodity markets, direct trade and remittances linkages with Russia and Ukraine, propagation through cross-border production networks, financial markets and impact on refugees. Food and fuel prices have risen up in particular – hitting low income nations hardest.
The Russia-Ukraine war has completely disrupted trade and caused a skyrocketing level of inflation in many crucial economies of the world. Global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022-23.
This is 0.8 and 0.2 percentages lower than what had been projected earlier in January. Extraordinarily high inflation has led to tightened monetary policy in many countries.
Overall risks to economic prospects have risen sharply and policy trade-offs have become ever more challenging.
Another significant problem is the lack of financial accessibility and availability in Asia. There is evidently a lack of financial technology in Asia, adding to the damage caused is the presence of income inequality.
Small and medium-sized enterprises (SMEs), including micro enterprises play a significant role in Asia’s economic development and contribute excessively to the domestic output in the region.
They accounted for 98% of all enterprises and 38% of GDP in Asia during 2007-12, according to the Asian Development Bank’s SME Finance Monitor 2013. Financial Technology and Digitalisation can offer various opportunities to address constraints by enabling SMEs to have better access to finance.
This could be done by using branchless banking technologies like internet banking as well as engaging in peer to peer lending or crowd funding.
One of the most important problems that the committee would have to tackle is to figure out how to exploit digitalisation’s ability to unlock productivity and growth for SMEs.
The press believes that the diplomats would be required to resolute measures that create a conducive environment where financial technology can thrive by redesigning regulatory policies to induce further innovation.
Dealing with this issue together by exchanging country experiences and challenges on financial technology and SME development among policy makers in Asia would be extremely useful.
Africa, on the other hand, has observed that the pace of skills and technological development and innovation remains extremely slow, presumably due to the absence of a university-level educated manpower skilled in hands-on technological development.
In addition to this is the lack of high quality laboratories and equipment, little to no resources to avail long-term finances and weak private sector initiatives.What is needed is for the committee to work together extract solutions from experiential circumstances and effectively manipulate economic policies so as to build a stronger policy framework leading to development