The “speed limit” of the global economy is set to slump to a three-decade low by 2030, a new World Bank report shows.
It urges enhanced productivity and the labour supply, ramping up investment and trade, and harnessing the potential of the services sector.
The report, “Falling Long-Term Growth Prospects: Trends, Expectations, and Policies”, analysed potential output growth rates after the COVID-19 pandemic and Russia’s invasion of Ukraine.
The research found that nearly all the economic forces that powered progress and prosperity over the last three decades are fading.
Between 2022 and 2030, average global potential GDP growth is expected to decline, with developing economies at the risk of a dip from 6% a year between 2000 and 2010 to 4%.
Indermit Gill, World Bank’s Chief Economist and Senior Vice President for Development Economics said a lost decade could be in the making for the global economy.
The official said the decline in growth has serious implications for the world’s ability to tackle the array of challenges such as poverty, diverging incomes, and climate change.
“But this decline is reversible. The global economy’s speed limit can be raised—through policies that incentivize work, increase productivity, and accelerate investment,” Gill noted.
Ayhan Kose, co-author of the report stressed that everyone owes it to future generations to formulate policies that can deliver robust, sustainable, and inclusive growth.
The Director of World Bank’s Prospects Group recommended a collective policy that would rejuvenate growth, and tasked countries to repeat their best 10-year record across a range of policies.
“At the international level, the policy response requires stronger global cooperation and a reenergized push to mobilize private capital,” Kose added.
Franziska Ohnsorge, co-author and World Bank’s Prospects Group Manager said though systemic banking crises do greater immediate harm than recessions, “their impact tends to ease over time”.