The World Bank warned that the average potential growth of the world economy will plummet to 2.2% per year until 2030, the lowest level in the last three decades.unless the authorities take ambitious initiatives to boost labor supply, productivity and investment.
If the expected general deceleration of the potential growth of the Gross Domestic Product (GDP) is not reversed, this would have profound repercussions on the world’s ability to cope with climate change and reduce poverty, the entity said Monday in a report.
But concerted efforts to boosting investment in sustainable sectors, cutting trade costs, boosting growth in services, and expanding labor force participation could boost potential GDP growth by as much as 0.7 percentage points to 2.9%, according to the report.
“The world economy could be living a lost decade,” said Indermit Gill, chief economist at the World Bank, adding that policies that encourage work, increase productivity and accelerate investment could reverse the trend.
The report notes that the overlapping crises of recent years, such as the COVID-19 pandemic and the Russian invasion of Ukraine, have ended nearly three decades of sustained economic growthadding to growing concerns about slowing productivity, essential for income growth and rising wages.
As a result, the average potential growth of GDP it will decline to 2.2% between 2022 and 2030, down from 2.6% in 2011-21, and almost a third below the rate of 3.5% recorded between 2000 and 2010.
Low investment will also slow growth in developing economies, whose average GDP growth will fall to 4% for the rest of the 2020s, down from 5% in 2011-2021 and 6% in 2000-2010.
According to the report, rising productivity, rising incomes and falling inflation have contributed to one in four developing countries achieving high-income nation status over the past three decades, but this trend it is changing.
He added that it is likely productivity to grow at the slowest rate since 2000, investment growth in 2022-2024 to be half that recorded in the last 20 years, and international trade to grow at a much slower rate.
To change the trajectory and attract more investment, the authorities must give priority to controlling inflation, guaranteeing the stability of the financial sector and reducing debt.
Increased climate-friendly investment in transportation and energy, climate-smart agriculture and manufacturing, and land and water systems could boost potential growth by as much as 0.3 percentage points a year, according to the report.
Source: Ambito
