Falling Long-Term Growth Prospects: Trends, Expectations, and Policies edited by M. Ayhan Kose and Franziska Ohnsorge published by World Bank (2023).
Across the world, a structural growth slowdown is underway: at current trends, the global potential growth rate—the maximum rate at which an economy can grow without igniting inflation—is expected to fall to a three-decade low over the remainder of the 2020s. Nearly all the forces that have powered growth and prosperity since the early 1990s have weakened, not solely because of a series of shocks to the global economy over the past three years. The growth rates of investment and total factor productivity are declining. The global labor force is aging—and expanding more slowly. International trade growth is much weaker now than it was in the early 2000s. The slowdown could be even more pronounced if financial crises erupt in major economies and spread to other countries as these types of episodes often lead to lasting damage to potential growth. A persistent and broad-based decline in long-term growth prospects imperils the ability of emerging market and developing economies (EMDEs) to combat poverty, tackle climate change, and meet other key development objectives. These challenges call for an ambitious policy response at the national and global levels. The slowdown can be reversed by the end of the 2020s—if all countries replicate some of their best policy efforts of recent decades and accompany them with a major investment push grounded in robust macroeconomic frameworks. Boosting human capital and labor force participation and making sound climate-related investments can also make a measurable difference in lifting growth prospects. Bold policy actions at the national level will need to be supported by increased cross-border cooperation and substantial financing from the global community.
