World Bank Warns Global Economy Risks “Lost Decade”

The World Bank warned on Monday that the global economy could enter a “lost decade,” with growth set to plummet to a three-decade low of 2.2% through 2030, if policymakers don’t take bold action to increase labor supply, productivity, and investment. 

In the World Bank’s new report, it warned that the world’s capability to combat climate change and eradicate poverty would be severely hindered if the anticipated broad-based decline in potential GDP growth was allowed to continue unabated.

However, the analysis found that integrated efforts to increase investment in environmentally friendly industries, reduce trade costs, leverage development in services, and increase labor force participation may increase growth potential by as much as 0.7 percentage points, to 2.9%.

World Bank chief economist Indermit Gill said that “a lost decade could be in the making for the global economy,” but that the situation could be turned around with the help of policies that encouraged work, boosted productivity, and sped up investment.

There have been growing concerns about sluggish productivity, which is necessary for income growth and rising wages, and the report argues that the overlapping crises of the past five years have ended nearly three decades of continuous economic expansion.

Hence, potential GDP growth was predicted to slow to 2.2% from 2022-2030, down from 2.6% in 2011-21 and by roughly a third from the 3.5% seen from 2000-2010.