The World Bank has estimated that the average global economic growth rate from 2022-2030 will only increase by 2.2 percent per year. This projection is approximately 30 percent lower than the average growth rate from 2000-2010.
In a report released on Tuesday (March 28, 2023), the World Bank also estimated that the average growth rate of developing countries will decrease to 4 percent per year during that period, from 6 percent per year from 2000-2010.
The World Bank predicts that this decline will steepen if there is a global financial crisis or recession. The Bank’s projection is based on the possibility of economic risks such as an aging global workforce and a decline in private sector investment.
Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics, said that the potential for sustained economic growth slowdowns has serious implications for the world’s ability to address the increasingly widespread and unique challenges of today.
“The speed of global economic growth can be increased through policies that incentivize employment, increase productivity, and accelerate investment,” said Gill.
According to the report’s analysis, the average annual economic growth rate has the potential to increase by 0.7 percentage points to 2.9 percent if countries adopt sustainable and growth-oriented policies. This would transform the projected slowdown into a potential acceleration of global GDP growth.
Ayhan Kose, the lead author of the report and Director of the World Bank’s Prospects Group, said that the current generation owes it to future generations to formulate policies that can generate strong, sustainable, and inclusive growth.
“Bold and collective policy impetus must be taken now to restore growth,” Kose said in his report.
At the national level, Kose said that each developing country needs to replicate its best practices in various policies over the past 10 years. At the international level, policy responses require stronger global cooperation and a stronger push to mobilize private capital.
Moreover, the report highlights specific policy actions at the national level that can make a significant difference in promoting long-term growth prospects, including aligning monetary, fiscal, and financial frameworks, increasing investment, cutting trade costs, leveraging services, and increasing labor force participation.
The report also emphasizes the need to strengthen global cooperation, considering that international economic integration has helped drive global prosperity for more than two decades since 1990.