The World Bank said Monday it expects global economic growth to fall to its lowest level in three decades by the end of 2030, calling the period from now until then the “lost decade.”
“The global economy’s ‘speed limit’—the maximum long-term rate at which it can grow without sparking inflation—is set to slump to a three-decade low by 2030,” it said in a report “Falling Long-Term Growth Prospects: Trends, Expectations, and Policies.”
“Nearly all the economic forces that powered progress and prosperity over the last three decades are fading. As a result, between 2022 and 2030 average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of this century—to 2.2 per cent a year,” it added.
For developing economies, growth is expected to slow down to a 4 per cent annual expansion during the remainder of this decade, down from 6 per cent annual growth between 2000 and 2010.
“These declines would be much steeper in the event of a global financial crisis or a recession,” the World Bank warned.
“A lost decade could be in the making for the global economy,” said the World Bank’s Chief Economist and Senior Vice President for Development Economics Indermit Gill.
He added that the ongoing decline in potential growth has serious implications for the world’s ability to tackle some of the current major challenges, such as poverty, diverging incomes, and climate change.
If, however, countries would adopt sustainable and growth-oriented policies, the potential growth could be increased by as much as 0.7 percentage points to an annual average rate of 2.9 per cent, according to the report.
“An ambitious policy push is needed to boost productivity and the labor supply, ramp up investment and trade, and harness the potential of the services sector,” it added.
