World Bank warns of ‘lost decade’ as potential growth slows

WASHINGTON – The global economy’s potential growth through the end of the decade has slowed to the weakest in 30 years, the World Bank said, citing fallout from the coronavirus pandemic and the conflict in Ukraine.

Having started the millennium on a faster trajectory, the global economy’s “speed limit” – or the highest long-term rate at which it can grow without triggering inflation – is set to slow between 2022 and 2030 to 2.2 per cent a year, the World Bank said in a report released on Monday.

“A lost decade could be in the making for the global economy,” Mr Indermit Gill, the World Bank’s chief economist and senior vice-president for development economics, said in a release accompanying the report.

“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,” he said.

The silver lining of the multilateral development bank’s 550-page report: Potential growth could reach as high as 2.9 per cent, marking an acceleration should policymakers deploy the right plans to boost productivity and labour supply and shore up investment.

The World Bank’s latest research is set against the backdrop of a fragile global economy that’s still reeling from

Russia’s war in Ukraine

and efforts to reopen after the darkest days of the Covid pandemic.

Many economies, including China, are facing ongoing demographic crises that have meant a mad scramble for policies to promote more childbearing – or to push back the retirement age, as France has most recently demonstrated.

The report’s analysts note that things could get worse, with steeper declines in potential growth if a global financial crisis or recession materialises. BLOOMBERG