World Bank warns about threat of lost decade

27.03.2023, 17:31
World Bank warns about threat of lost decade - Photo

A "lost decade" threatens the global economy due to a potential slowdown in growth. It can be averted if policymakers take ambitious initiatives to boost investment, productivity and labor supply, the World Bank said on Monday.

Between 2022 and 2030, the average potential increase in global GDP will slow to 2.2%, roughly below the rate recorded in the "noughties". For developing countries, the decline will be just as steep, from 6% in 2000-2010 to 4% in the years remaining until the end of the current decade.

The fallout could be much worse in the event of a global financial crisis or recession.

"A lost decade could be in the making for the global economy. 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," said World Bank's Chief Economist Indermit Gill.

The term "lost decade" is often used to describe the situation in Japan in the 1990s, when the country suffered a severe economic crisis after many years of rapid growth. This crisis led to a deterioration in the standard of living and a decrease in confidence in the country's economic system.

But the World Bank believes that the lost decade can still be avoided. Concerted efforts aimed at stimulating investment, reducing costs, stimulating the service sector and increasing the labor market can increase potential GDP growth by 0.7 percentage points to 2.9%, according to the bank's report.

In 2000-2010, the average growth was 3.5%, but in 2011-2021 was only 2.6%.

The World Bank separately emphasizes the need to strengthen international economic integration, which contributed to global prosperity in the late 1990s and early 2000s.

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