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The World Bank has warned that the potential global growth of the economy will fall to 2.2% per year in 2030, the lowest level in the last 3 decades, creating a “lost decade” for global finance. A situation that could be reversed only if ambitious initiatives are adopted to boost labor supply, productivity and investment.
The new World Bank report warns that if the general slowdown in the potential growth of the Gross Domestic Product (GDP) is not reversed, the global capacity to deal with climate change and reduce poverty would be compromised.
Efforts to invest in sustainable sectors, cut trade costs, boost growth in services, and expand labor force participation could help boost GDP growth by up to 0.7 percentage points to 2.9% , as the document shows.
“The world economy could be living a lost decade,” said Indermit Gill, chief economist at the World Bank. The average rate of GDP growth is a kind of “speed limit” for the world economy, marking the long-term ceiling at which it can grow without causing excess inflation.
The report details that the latest global crises, such as the Covid-19 pandemic and the war in Ukraine, put an end to almost three decades of sustained economic growth. A panorama to which is added the growing concern about the slowdown in productivity.
This reduced average potential GDP growth to 2.2% between 2022 and 2030, down from 2.6% in 2011-21, and almost a third below the 3.5% rate recorded between 2000 and 2010.
The fall in investment will also slow progress in developing economies, whose average growth will fall to 4% for the rest of the 2020s, down from 5% in 2011-2021 and 6% in 2000-2010.
Policy makers must give priority to controlling inflation, a measure that the world’s central banks are already carrying out by raising interest rates, but with the challenge of guaranteeing the stability of the financial sector and reducing debt.
The bank says that boosting exports of digital services could translate into large productivity gains, while raising the participation of women and others in the labor force could raise global potential growth rates by as much as 0.2 percentage points. per year from now to 2030.
with Reuters
