It's a sobering reality: A quarter of the world's developing nations are poorer now than they were before the COVID-19 pandemic. The World Bank's recent findings paint a concerning picture of economic stagnation and hardship for many countries, especially those in sub-Saharan Africa.
The report highlights a significant 'downshift' in global growth since the pandemic, a pace deemed insufficient to tackle extreme poverty and create much-needed jobs. The World Bank estimates that economic growth in emerging markets and developing economies will slow from 4.2% last year to 4% next year.
While the global economy has shown more resilience than initially anticipated – particularly due to the US economy's performance – the path forward remains challenging. Progress is expected to be modest in both developed and developing nations in the coming years. For instance, the US economy is projected to grow by 2.1% in 2025 and 2.2% in 2026. Meanwhile, the Eurozone is lagging, with growth rates of only 0.9% and 1.2% for the same years, respectively.
Global growth is predicted to remain relatively stable over the next two years, easing from 2.7% in 2025 to 2.6% in 2026, before returning to 2.7% in 2027. This is a slight upward revision from the June forecast.
Many of these struggling nations have also faced additional challenges like wars and famines, further hindering their recovery. The World Bank's chief economist, Indermit Gill, points out that these trends aren't solely due to bad luck; they also reflect avoidable policy mistakes.
But here's where it gets controversial... Gill emphasizes the need for developing countries to adhere to strict budget rules to foster sustainable growth. He suggests a universal formula: aggressively liberalize private investment and trade, curb public consumption, and invest in new technologies and education.
He also notes that the global economy, despite its resilience, is struggling to generate enough growth to create jobs, especially for the 1.2 billion people under the age of 16 expected to enter the job market in the next decade.
And this is the part most people miss... The world economy is projected to grow slower than it did in the troubled 1990s, all while carrying record levels of debt.
China's growth is expected to be 4.4% this year and 4.2% next year. Though upgraded from previous assessments, these figures still represent the lowest growth in 35 years and fall short of the Communist Party's target of 5%.
What do you think? Do you agree with the World Bank's assessment of the situation? What policy changes do you believe are most crucial for these developing nations to achieve sustainable growth? Share your thoughts in the comments below!
