Page 8 - TEXtalks. March- April 2023

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Global economy’s “Speed

Limit” set to fall to

three-decade low

The global economy’s “speed limit”—the maximum an annual average rate of 2.9 percent—if countries
long-term rate at which it can grow without sparking adopt sustainable, growth-oriented policies. That
inflation—is set to slump to a three-decade low by would convert an expected slowdown into an
2030 states a recent World Bank report. acceleration of global potential GDP growth. The
report highlights specific policy actions at the
“We owe it to future generations to formulate national level that can make an important difference
policies that can deliver robust, sustainable, and in promoting long-term growth prospects:
inclusive growth,” said Ayhan Kose, a lead author
of the report and Director of the World Bank’s Align monetary, fiscal, and financial frameworks
Prospects Group. “A bold and collective policy Robust macroeconomic and financial policy
push must be made now to rejuvenate growth. At frameworks can moderate the ups and downs of
the national level, each developing economy will business cycles. Policymakers should prioritize
need to repeat its best 10-year record across a taming inflation, ensuring financial-sector stability,
range of policies. At the international level, the reducing debt, and restoring fiscal prudence. These
policy response requires stronger global policies can help countries attract investment by
cooperation and a reenergized push to mobilize instilling investor confidence in national institutions
private capital.” and policymaking.

An ambitious policy push is needed to boost Ramp-up investment In areas such as transporta-
productivity and the labor supply, ramp up tion and energy, climate-smart agriculture and
investment and trade, and harness the potential of manufacturing, and land and water systems, sound
the services sector, a new World Bank report investments aligned with key climate goals could
shows. Between 2022 and 2030 average global enhance potential growth by up to 0.3 percentage
potential GDP growth is expected to decline by points per year as well as strengthen resilience to
roughly a third from the rate that prevailed in the natural disasters in the future.
first decade of this century—to 2.2 percent a year.
For developing economies, the decline will be Cut trade costs Trade costs—mostly associated
equally steep: from 6 percent a year between 2000 with shipping, logistics, and regulations—effectively
and 2010 to 4 percent a year over the remainder of double the cost of internationally traded goods
this decade. These declines would be much today. Trade costs, moreover, can be reduced in
steeper in the event of a global financial crisis or a climate-friendly ways—by removing the current bias
recession. toward carbon-intensive goods inherent in many
countries’ tariff schedules and by eliminating
The report states that potential GDP growth can be restrictions on access to environmentally friendly
boosted by as much as 0.7 percentage points—to goods and services.

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