How to absorb China’s contribution to global growth?
(Photo: dpa)
Washington The World Bank gives a pessimistic outlook on the global economy. Almost all trends that drive progress and prosperity are losing momentum, says a new report. “The world economy is facing a lost decade,” said Indermit Gill, chief economist at the World Bank on Monday. Average global growth could contract by about a third by 2030 compared to 2000-2010.
The World Bank is assuming a slower growth rate of 2.2 percent by the end of the current decade. Developing countries, which still recorded six percent growth in the early 2000s, would have to expect growth rates of around four percent in the coming years.
Responsible for this are the consequences of the corona pandemic, the supply chain problems and the energy crisis in the wake of the Ukraine war, but also the recent instabilities in the banking system. In the event of a financial crisis or recession, growth is likely to “slacken much more,” warned the Washington institution specializing in development aid.
“China, the US and Europe have suffered setbacks of varying degrees,” said Ayhan Kose, head of sustainable growth at the World Bank. “It affects everything, trade or private investment.”
According to Kose, the war in Ukraine is the “greatest factor of uncertainty” in Europe, and the shortage of workers is increasingly causing problems in the USA. But also long-term factors such as aging societies and the low participation rate of women should not be underestimated.
China is a growth engine – for now
The International Monetary Fund (IMF) only warned of new uncertainties on Sunday. “The risks to financial stability have increased,” said IMF Director Kristalina Georgieva during an appearance in Beijing.
Georgieva praised the “rapid response” by politicians and central banks to bail out distressed banks. According to the IMF, the global economy is expected to grow by almost three percent this year, a slight decline compared to 2022. The engine of global growth is China, whose economy is recovering rapidly. China’s gross domestic product is expected to increase by more than five percent this year.
World Bank economist Gill warned that this upswing might not last. “The question is, what do we replace China’s contribution to growth with?” he said. “One country cannot do that, it has to be several countries together.”
The World Bank recommends several measures: curbing inflation, stabilizing the financial sector, reducing debt, lowering the cost of trade and investing in sustainability. The World Bank warns that otherwise the international community will not be adequately equipped to deal with “challenges of the century” such as poverty and climate change.
Also read: “The destruction of prosperity instead of growth is currently on the agenda,” says Hans-Werner Sinn in an interview.