key: cord-0057998-4tjhx8wb
authors: Popkova, Elena G.; Oudah, Al-Muttar Mohammed Yousif; Ermolina, Liliya V.; Sergi, Bruno S.
title: Financing Sustainable Development Amid the Crisis of 2020. A Research Note
date: 2021-02-03
journal: Modern Global Economic System: Evolutional Development vs
DOI: 10.1007/978-3-030-69415-9_88
sha: e2a2bf1b8734d9a3505056e001666a6f8f6cfbfa
doc_id: 57998
cord_uid: 4tjhx8wb

Purpose: The purpose of this chapter is to study the problem of sustainable development financing in the conditions of the budget deficit and investment collapse during the 2020 crisis and to determine the perspectives of solving this problem. Design/Methodology/Approach: The authors determine regression dependence of the sustainable development manifestations on the possibilities of sustainable development financing: state budget surplus as the difference between revenues and expenditures, government debt, and volume of private investments. Forecasts of change of the indicators’ values, which characterize the opportunities for sustainable development financing, are developed. The established regression dependence helps to determine the consequences for sustainable development. Findings: A forecast of financing and sustainable development amid the crisis of 2020 is compiled. The budget deficit will be more vivid (surplus budget will decrease by 220.61%, and government debt will grow by 85.42%); the investment will shrink by 41.96%. State financing has more significant influence (regression coefficient equals 379.34 for state budget surplus and 67.41 for government debt on average); private investments (regression coefficient is −266.64 on average). Originality/Value: A far-reaching influence of deficit of financing for sustainable development is moderately negative on the whole – the expected decrease of all indicators of sustainable development under the control of the 2020 crisis compared to 2019, will constitute −0.55%. The perspectives of solving the problem of sustainable development financing in the conditions of the budget deficit and investment collapse under the influence of the 2020 crisis are connected to balancing the revenues and expenditures of government debt, limitation of borrowings, reduction of the volume of government debt, and attraction of investments in economy and restriction of their outflow.

Abstract. Purpose: The purpose of this chapter is to study the problem of sustainable development financing in the conditions of the budget deficit and investment collapse during the 2020 crisis and to determine the perspectives of solving this problem.

Design/Methodology/Approach: The authors determine regression dependence of the sustainable development manifestations on the possibilities of sustainable development financing: state budget surplus as the difference between revenues and expenditures, government debt, and volume of private investments. Forecasts of change of the indicators' values, which characterize the opportunities for sustainable development financing, are developed. The established regression dependence helps to determine the consequences for sustainable development.

Findings: A forecast of financing and sustainable development amid the crisis of 2020 is compiled. The budget deficit will be more vivid (surplus budget will decrease by 220.61%, and government debt will grow by 85.42%); the investment will shrink by 41.96%. State financing has more significant influence (regression coefficient equals 379.34 for state budget surplus and 67.41 for government debt on average); private investments (regression coefficient is −266.64 on average).

Originality/Value: A far-reaching influence of deficit of financing for sustainable development is moderately negative on the wholethe expected decrease of all indicators of sustainable development under the control of the 2020 crisis compared to 2019, will constitute −0.55%. The perspectives of solving the problem of sustainable development financing in the conditions of the budget deficit and investment collapse under the influence of the 2020 crisis are connected to balancing the revenues and expenditures of government debt, limitation of borrowings, reduction of the volume of government debt, and attraction of investments in economy and restriction of their outflow.

Keywords: Problems of financing Á Sustainable development Á Budget deficit Á Investment collapse Á 2020 economic crisis

A challenge of sustainable development appears during the implementation of the market model. On the one hand, sustainability is a public benefit, for it creates advantages for all economic actors. For example, fighting climate changes improves the environment for population and business, and an increase of openness and justice in society provides everyone with equal opportunities. The results in the sphere of sustainable development cannot be sold as economic benefits. They cannot directly offer direct commercial revenue. Thus, sustainable development measures are financed by governments and depend on the budget's capabilities.

On the other hand, during increased consumer awareness and development of the responsible consumption culture, the possibility of obtaining indirect commercial profits from the initiatives in the sphere of sustainable development grows. In this case, corporate social and ecological responsibility stimulates the creation of a company's marketing advantages in the form of an increase of reputation, growth of consumers' loyalty, and an increase in the volume of sales, profit, and profitability. Also, a responsible society stimulates the popularity of private non-profit initiatives on the economy's sustainability support, which boosts private investments in sustainable development.

The above contradiction causes uncertainty about the consequences of the 2020 economic crisis for sustainable development. Given the high social responsibilities of governments around the world, it is possible to expect soaring budget deficits in 2020. Also, the risks of entrepreneurship's losses are extremely high. This creates high barriers to sustainable development financing. Though the state budget surplus and losses of private businesses are yet to be calculated, it is possible to expect significant financial losses. The 2020 economic crisis will definitively cause uncertainty and risks to sustainable development financing.

The topic's importance is that financing is crucial and the key criterion for implementing the corresponding measures. As this crisis creates significant risks of funding for sustainable development, it is necessary to evaluate these risks and determine a full-scale implementation of sustainable development measures.

Acknowledging the importance of the above issues, the purpose of this chapter is to study the problem of sustainable development financing in deficit and investment collapse under the influence of the 2020 crisis and to determine some perspectives.

The contradiction of sustainable development, caused by a combination of commercial and non-commercial characteristics, is studied in the works Andronova et al. (2019) (2017), Pozdnyakova et al. (2017) .

The differences in the significance of government and private financing for sustainable development have not been determined. The consequences of the 2020 crisis and the perspectives of overcoming them on managing the sustainability' financial support have not been established. The research objects in this paper are the top 10 countries that suffered (by the criterion of COVID-19 morbidity) from the 2020 economic crisis, according to the statistics of the World Health Organization (2020).

For the practical purposes of this paper, we set regression dependence of the sustainable development on the possibilities of sustainable development financing: the surplus as the difference between revenues and expenditures, government debt, and the volume of private investments (Table 1) .

Based on direct averages and standard deviations (Table 1) , we set automatic forecasts of change of the values of indicators that characterize the possibilities for sustainable development financing in 2020. The established regression dependencies are used for determining the consequences for sustainable development.

For determining the scale of the problem of sustainable development financing, let us use the results of forecasting of these indicators' change in 2020. Figures 1, 2 and 3 show forecasts "other conditions being equal." During a crisis, it is possible to expect the worst values out of these indicators' probable values. During an economic crisis, state revenues contract and expenditures mount. In Fig. 1 , the least out of rather probable (probability equals 3% with "all other conditions being equal," but strives to 100% during a crisis) values of the state budget surplus (x 1 ) is −8.15% of GDP.

During an economic crisis, government debt soars because of high social requirements. There is an alternative in the form of an increase in taxes or a reduction of expenditures. But this would not be acceptable during the 2020 economic crisis due to notable burdens on the government's social requirements. In Fig. 2 , the largest out of rather probable (probability equals 3% with "all other conditions being equal," but strives to 100% during a crisis) values of government debt (x 2 ) is 143.49% of GDP. During an economic crisis, investments in the economy drop down due to high investment risks and uncertainty. In Fig. 3 , the smallest out of rather probable (probability equals 4% with "all other conditions being equal," but strives to 100% during a crisis) values of the volume of investments in economy (x 3 ) is 12.77% of GDP.

Based on the data from Table 1 , we obtain the following multiple linear regression, which reflect the influence of financing on sustainability of economy's development:

y 1 = 77.85 + 1.30*x 1 + 0.11*x 2 -0.49*x 3 , correlation -70.02%; y 2 = −5.99-0.17*x 1 + 0*x 2 + 0.35*x 3 , correlation -92.15%; y 3 = 34,521.01 + 1,515.06*x 1 + 269.45*x 2 -1,065.77*x 3 , correlation -68.66%; y 4 = 86.62 + 1.17*x 1 + 0.06*x 2 -0.63*x 3 , correlation -86.97%.

For modeling the forecast scenario of sustainable development through 2020, we plug into the regression equation the forecast values of indicators x 1 , x 2 , and x 3 in the obtained regression models and thus compiled a perspective (the most probable) scenario of sustainable development in light of the budget deficit and investment collapse under the impact of the 2020 crisis (Table 2) . The growth of the indicators, according to the compiled scenario, is shown in Fig. 4 .

According to Fig. 4 , the influence of budget deficit and investment collapse on sustainable development is moderate and positive for most of the indicators, which could be explained by a margin of error. The most vivid negative influence is seen with the economic growth rate, which reduces by 80.785 in 2020 as compared to 2019.

We have forecasted the financing of sustainable development according to which budget deficit will be more vivid (state budget surplus will decrease by 220.61%, and government debt grows by 85.42%); than investment collapse (the volume of investments in economy will shrink by 41.96%). Government financing has a considerable influence (regression coefficient equals 379.34 for state budget surplus and 67.41 for government debt on average) than private investments (regression coefficient equals −266.64 on average).

The aggregate influence of financing for sustainable development is moderately negative on the wholethe expected decline of the values of all indicators of sustainable development throughout the 2020 crisis, as compared to 2019, will constitute −0.55%. The perspectives of solving the problem of sustainable development financing in the conditions of the budget deficit and investment collapse under the influence of the 2020 crisis are connected to balancing the revenues and expenditures of government debt, limitation of borrowings, reduction of the volume of government debt, and attraction of investments in economy and restriction of their outflow. 

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Acknowledgments. The research was performed with financial support from the Russian Fund of Fundamental Research within the scientific project No. 18-010-00103 A.