This is just a very small area and only the surface paint seems to have cracked. There was no evidence of water in the area. The exterior wall is brick and does have some areas where the mortar is missing between the bricks.
Cracked paint is usually from the drywall moving or from drywall cracks underneath the paint. Flaking paint is usually from improper bond to the drywall ( eg. no primer ). The bubbling is usually from water getting in behind the paint.
Either you have a roof leak, water pipe leak or an attic ventilation problem that creates ice and frost build up during the winter and melts in the spring. As for the missing mortar, you should get that addressed. It can let in water, especially with a wind driven rain.
If this is something new on a wall that has been standing for years then a lack of primer is a good start. If water is getting through the building envelope and managing to make its way to the backside of the drywall, that moisture will eventually show itself as mould or peeling paint.
Suggest using a moisture metre to assess before ripping apart the wall to inspect. Definitely get the mortar fixed.
Best of luck!
Search the TrustedPros directory and discover the best contractors in your area.Find your home service pro