Long-term growth in the world economy is expected to average 2.2% by 2030, according to a report released on Monday by the World Bank (WB). This would make this decade the slowest-growing one since the turn of the century.
Almost all of the economic forces that drove progress and prosperity over the past three decades are fading away, the World Bank says. As a result, the global economy could be in for “a lost decade.”
This decline in growth is expected to affect the most advanced countries as much as developing and emerging countries, starting with China, the WB said in its report.
China has long played a role in pulling global growth, but this is changing as its growth gradually slows, the institution’s chief economist, Indermit Gill, told a telephone news conference. The question now is who is going to replace China in that role, and the World Bank thinks it should not come from one country but from a group of countries, Gill said.
Among the causes of the slowdown in global potential growth, the WB identifies the effects of the Covid-19 pandemic, particularly in its impact on the education of children and adolescents and the long-term effect this will have on the economy, as well as the war in Ukraine and the trade disruptions it causes.
Education is an important element of growth, not only in terms of employee productivity but also in labour force integration: the more educated people are, the longer they stay in the labour force, Franziska Ohnsorge, the economist in charge of the report, told the press.
The WB also stresses that the impact on growth of the educational lag caused by the pandemic “will go well beyond the horizon set by this report”.
Nevertheless, the institution estimates that global potential growth can be improved by 0.7% on average if all countries carry out a series of reforms in this direction. This concerns in particular investment – which has also been declining since the pandemic – women’s access to the labour market or improving conditions for access to world trade.
The WB is also optimistic about the risk of fragmentation of the global economy, saying it is not a given that this will happen.
The fact that China is exporting less, for example, is linked to an increase in its domestic consumption, which is a good thing, not evidence of fragmentation, Indermit Gill said, adding that there is also a rise in China’s share of world trade in services, “which is also a good thing.”