The warning comes as the world deals with overlapping crises — a pandemic that crippled economies and strained public health systems and Russia’s invasion of Ukraine, which disrupted global supply chains and hurt international trade ties. The threat of a more protracted slump coincides with new signs of stress in the world’s financial system as a series of banking crises threaten to undermine economic growth.
The World Bank projected in a new report that average potential global output is poised to fall to a 30-year low of 2.2% per year between 2023 and 2030. That would be a sharp decline from 3.5% per year during the first decade of this century.
The falloff will be even more pronounced for developing economies, which grew at an average annual rate of 6% from 2000 to 2010; that rate could decline to 4% this decade.
“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics. “The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times — stubborn poverty, diverging incomes and climate change.”
Officials at the World Bank said the “golden era” of development appeared to be coming to an end. They warned that policymakers would need to get more creative as they tried to address global challenges without being able to rely on the rapid economic expansions of countries such as China, which has long been an engine of worldwide growth.
They suggested that international monetary and fiscal policy frameworks should be more closely aligned, and that world leaders needed to find ways to reduce trade costs and increase their labor force participation. A return to faster growth, they said, will not be easy.“It will take a herculean collective policy effort to restore growth in the next decade to the average of the previous one,” the World Bank said in the report.
