Every two years, the Global Outlook presents new data, analysis and recommendations for members of the OECD and the international community to advance a more holistic approach to financing sustainable development globally, as called for in the 2015 Addis Ababa Action Agenda.

The global outlook on financing for sustainable development has deteriorated since our last projection in 2021. Sustainable development needs are greater and resources for developing countries are less. Extreme poverty levels are rising for the first time in decades. Countries most in need are paying a high price for Russia’s war of aggression against Ukraine, while impacts from COVID lockdowns and supply chain disruptions linger. As a result, growth has been dragged down, and inflation driven up, with high food and energy prices hurting poor people the most. 193 million people experienced acute food insecurity in 2021. This is an increase of nearly 40 million people in one year, even before Russia’s war against Ukraine disrupted global food supply. At the same time, the increasing impact of climate change is felt around the world. Despite having contributed historically the very least to global greenhouse gas emissions, developing countries have lost 20-25% of cumulative GDP per capita since the turn of the 21st century due to temperature increase.

The pandemic and Russia’s war of aggression against Ukraine heighten the risk of a Great Divergence between developed and developing countries, and increase pressure on financing for the Sustainable Development Goals (SDGs). The COVID-19 crisis prompted the largest global recession since the Second World War. The nascent global economic upturn masks a protracted recovery in the poorest countries. The war in Ukraine is further driving up food and energy prices, affecting the most vulnerable households.

Following the pandemic, a K-shaped recovery emerged across countries (). Output losses in developing countries sank to 5% of their pre-pandemic gross domestic product (GDP) projections, while high-income countries (HICs) dipped only by 3%. Among the countries most in need, the GDP of small island developing states (SIDS) dropped the furthest, by -8.6%, in large part because the tourism sector was directly affected by travel restrictions and lockdowns. Altogether, developing countries lost USD 1.4 trillion in GDP annually due to the COVID-19 crisis, more than half of the pre-COVID-19 annual SDG financing gap (IMF, 2020[3]; Intergovernmental Panel on Climate Change, 2022[4]).

This chapter examines the contrasting impact on the global economy of the COVID-19 pandemic, Russia’s war of aggression against Ukraine and other recent crises. While rich countries are beginning to turn the corner on the COVID-19 crisis, prospects of a strong and sustainable recovery in developing countries are vanishing – signs of an emerging two-track recovery that is widening inequalities between and within countries.

Although a major collapse of financing for sustainable development was avoided after the COVID-19 pandemic in 2020, developing countries’ government revenue did drop significantly and the SDG financing gap got wider. In the wake of Russia’s war against Ukraine, many of them face reduced access to financing, increased volatility of private investment, and limited fiscal space to invest in a just and sustainable recovery. Improved mobilisation of domestic resources, sustained efforts by official providers, and reducing illicit financial flows and public sector inefficiencies will be critical to avoid a prolonged divergence in countries’ capacity to finance their development.

To fully align with the SDGs, and build resilience to future global shocks, financing must be both sustainable and equitable. As the cross-border impacts of climate, health, geopolitical, economic and social emergencies demonstrate, there can be no sustainability without equity. In developed countries, a recent boom in investment labelled as sustainable has increased the trillions of US dollars in financial assets seeking to mitigate environmental, social and governance risk and to preserve long-term value. Yet this finance is largely bypassing the countries that need it most, and access to sustainable finance remains inequitable. Little progress has been made to redirect finance in support of SDG impact, e.g. to address the risks of growing poverty and inequalities. Much remains to design SDG-aligned regulations, frameworks and standards, to build sustainable finance markets and to redirect financing all along the SDG value chain.