Global Economy Growth Slows Down
The World Bank has found that a quarter of countries in the developing world are poorer than they were in 2019, before the Covid pandemic. This is a concerning trend, especially in low-income countries, many of which are located in sub-Saharan Africa. These countries have suffered a negative shock in the six years leading up to the end of last year, resulting in lower average incomes.
Affected Countries
Some of the countries that have been affected include Botswana, Namibia, the Central African Republic, Chad, and Mozambique. Additionally, South Africa and Nigeria, which has a fast-growing population, have failed to raise average incomes over the period, despite experiencing growth of 1.2% and 4.4% respectively last year. This is a worrying sign, as these countries are struggling to recover from the pandemic and achieve sustainable economic growth.
Global Economic Trends
The World Bank has reported that global growth has "downshifted" since the pandemic, and the current pace is "insufficient to reduce extreme poverty and create jobs where they’re needed most." Economic growth in emerging market and developing economies is estimated to slow from 4.2% last year to 4% next year. This slowdown is a concern, as it may exacerbate poverty and unemployment in these regions.
Regional Economic Performance
The US economy is expected to grow by 2.1% in 2025 and 2.2% in 2026, while the euro area is expected to grow by just 0.9% in 2025 and 1.2% in 2026. China, on the other hand, is expected to grow at 4.4% this year and 4.2% next year, which is still the lowest growth in 35 years. These regional economic trends will have a significant impact on the global economy and trade.
Causes of Slow Growth
According to Indermit Gill, the World Bank’s chief economist, the slow growth in developing countries cannot be explained by misfortune alone. Instead, it reflects avoidable policy mistakes, such as failing to stick to strict budget rules and not investing in new technologies and education. To achieve sustainable growth, governments in emerging and advanced economies must aggressively liberalize private investment and trade, rein in public consumption, and invest in human capital.
Challenges Ahead
The global economy is facing significant challenges, including high levels of public and private debt. The World Bank expects the global economy to grow slower than it did in the troubled 1990s, while carrying record levels of debt. This is a concern, as it may lead to financial instability and undermine economic growth. Furthermore, the world economy is set to face a significant challenge in the coming years, as 1.2 billion young people are expected to enter the job market, putting pressure on governments to create jobs and stimulate economic growth.
Conclusion
In conclusion, the global economy is facing a slowdown, with a quarter of developing countries experiencing lower average incomes than in 2019. The World Bank has identified avoidable policy mistakes as a key cause of this trend, and has called on governments to take action to stimulate economic growth and create jobs. The challenges ahead are significant, but with the right policies and investments, it is possible to achieve sustainable economic growth and reduce poverty.
