Between 2022 and 2030, the potential average global GDP growth will slow to 2.2%, below the zero-year rate, the bank said.
For developing countries, the decline will be just as steep, from 6% in 2000-2010 to 4% in the remaining years until the end of the current decade. Also, the drop could be much worse in the case of a global financial crisis or recession.
The term lost decade is often used to describe Japan’s situation in the 1990s, when the country suffered a severe economic downturn after many years of rapid growth. This crisis led to a deterioration in the standard of living and decreasing confidence in the country’s financial system.
But the WB believes that a lost decade can still be avoided by stimulating investment, reducing costs, stimulating the service sector, and increasing the labor market to increase potential GDP growth by 0.7% to 2.9%.