Lack of capital development


[Developing countries] Local savings in developing countries are often badly invested in terms of the facilitating of further economic growth. The shortage of long-term financing not only undermines capital formation but also shortens the time horizon of investors, and tends to direct funds into short-term speculative investments with quick pay-offs. An excessive preference for purchasing land leads only to its over-valuation. Over-investment in buildings in metropolitan cities is a feature of some developing countries, especially during inflation. Larger enterprises often merely reinvest in the extension of their own concerns where more diffused investment through the economy would bring larger returns to the economy as a whole. Lax monetary policies, high inflation and negative interest rates have helped to perpetuate this situation in some developing countries. Besides, the capacity to save, particularly in the case of debtor countries, has been impaired by the adjustment policies adopted in response to external imbalances.

Related UN Sustainable Development Goals:
GOAL 1: No PovertyGOAL 2: Zero HungerGOAL 3: Good Health and Well-beingGOAL 4: Quality EducationGOAL 5: Gender EqualityGOAL 6: Clean Water and SanitationGOAL 7: Affordable and Clean EnergyGOAL 8: Decent Work and Economic GrowthGOAL 9: Industry, Innovation and InfrastructureGOAL 10: Reduced InequalityGOAL 11: Sustainable Cities and CommunitiesGOAL 12: Responsible Consumption and ProductionGOAL 13: Climate ActionGOAL 14: Life Below WaterGOAL 15: Life on LandGOAL 16: Peace and Justice Strong InstitutionsGOAL 17: Partnerships to achieve the Goal
Problem Type:
D: Detailed problems
Date of last update
04.10.2020 – 22:48 CEST