Economic Growth

We need to kickstart growth – but this time, it must work for all

graphic of valuable papers, charts and diagrams in a blog about economic growth

We must restart the economic growth engine and create opportunities for the younger generation. Image: Shutterstock/Sergey Nivens

Saadia Zahidi
Managing Director, World Economic Forum
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SDG 08: Decent Work and Economic Growth

It was first published by Caixin Global and Astro Awani.

  • The current era is one of the most complicated and unpredictable geopolitical and geoeconomic environments in decades.
  • Many countries, mainly in the Global South, are still struggling to bounce back from COVID-19, supply shocks and economic volatility.
  • Here's how we can help restart the economic growth engine and create a new economic model that works for all.

We are living through arguably one of the most complicated, unpredictable geopolitical and geoeconomic environments in decades. Violent conflicts — the highest number since the Second World War — are amassing dire humanitarian costs, disrupting trade and energy supplies, and contributing to ongoing food and fuel crises.

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When it comes to the economy, many countries have defied pessimistic predictions, but others, mainly in the Global South, are still struggling to bounce back from the upheaval caused by COVID-19, followed by supply shocks, higher costs of capital and currency volatility.

A unique set of challenges call for new solutions

In many low-income countries, poverty rates are still higher today than they were pre-pandemic. And most least-developed economies are import-dependent for both food and energy, leaving them exposed to lower supplies and higher prices. The World Food Programme estimates 333 million people are facing acute levels of food insecurity, an increase of almost 200 million people since before the pandemic.

Developing economies also have high levels of external public debt, which increased between 2010 and 2021 from 19% of their GDP to 29%. This makes them more exposed to changing global economic conditions, like rising interest rates and exchange rate fluctuations, and limits their ability to service debt.

In the past three years, there have been 18 sovereign defaults, more than the total number of defaults in the previous two decades. Already, today, 3.3 billion people live in developing countries that spend more on interest payments than on education or health.

Debt distress and constrained resources also stifle much-needed investments in technology and innovation. The AI revolution, for example, offers huge opportunities when it comes to increasing the efficiency of output production and innovation. But these benefits might be harder for developing countries to capitalize on, in large part because of the current digital divide between North and South, translating to even more inequality.

When it comes to the climate, countries in the Global South have already fared far worse than others, in terms of both the economic and human costs, but, if not managed correctly, the transition to a green economy could create high costs and inequalities for these same countries.

Overall, the economic outlook is more promising than it was a year ago, but as International Monetary Fund (IMF) experts warned at their recent Spring Meetings, we are still heading towards historically low levels of growth, which continues to threaten to undo decades of progress when it comes to reducing global inequalities and extreme poverty.

To avoid backsliding – and to create new opportunities for younger generations – we must restart the economic growth engine. There are three fundamental prerequisites to getting this right.

1. Measuring growth – in a new way

GDP growth is a useful measure, telling us a lot about the health of an economy. But it is a blunt instrument. It is not a good substitute for evaluating living standards, it does not tell us much about environmental impact, it doesn’t say how resilient an economy is to shocks, and it doesn’t tell us if the types of investments being made will generate innovation and returns in the long term. Pursuing “growth at all costs” is therefore a myopic approach. The quality of growth matters as much – if not more – than its speed.

In the past, short-term growth has often come at the expense of other, equally important goals. According to recent analysis, the world is only half way towards combining growth with other long-term priorities. As policymakers pursue new ways to start the growth engine, we need new measures that look at both speed and quality.

The World Economic Forum’s Future of Growth framework is one such effort, creating a dashboard for countries to take a balanced look across both GDP measures and their performance on sustainability, innovation, resilience and inclusiveness, with growth serving as the basis of a virtuous cycle, not an end in itself.

2. Reviving North-South economic collaboration

Now more than ever is the time for global collaboration to carve out a new model of economic growth and development. And yet the opposite has been happening.

Geopolitical fragmentation has been bleeding into the economic sphere, further hindering global trade and capital flows. According to some estimates, protectionist measures have increased by 38% in the past year. As belts tighten, vital aid from wealthy nations for priority areas like climate adaptation in emerging economies has fallen at a time when it’s needed most.

In times of uncertainty, it can be tempting for countries to take a ‘batten down the hatches’ approach. History has shown this is counter-productive. In the long term, win-win beats win-lose strategies. With respect to trade in goods, services, ideas, technology, and talent – the appropriate measures to support specific communities, entrepreneurs and innovators – will lead to better outcomes for advanced and developing economies alike.

As an example, the rise of always-on connectivity is creating new opportunities for more globalized talent value chains, helping higher-income countries address their skills shortages and enhancing accessibility to high-quality jobs for workers in the Global South.

3. Investing in the right foundations

In an era of technological change that is seeing a green transition, resurging industrial policies, and restructuring of supply chains, visionary policymakers everywhere can craft new opportunities for their economies. This would help their populations thrive both locally and in the global economy.

For some economies it means becoming new manufacturing lighthouses or rapidly integrating AI to support public services, from heath to education and transport. For others it’s a vital moment to trade on new critical metals and minerals or build on their comparative advantage in knowledge and services industries. Yet many of the developments that will likely underpin future economic growth are something of a double-edged sword.

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Artificial intelligence, for example, has the potential to contribute trillions to the global economy over the coming years. But it won’t do so without causing disruptions along the way. The same applies to the green transition across energy, infrastructure, consumer goods, and more.

We expect churn across 23% of all jobs in the next five years due to these transformations. Investing in technology or in the energy transition without concurrent investment in human capital is therefore unlikely to generate sustainable returns.

There are robust forecasts on the types of roles and tasks that will be most drastically affected by technological and other changes. Armed with this kind of information, leaders from business, government and beyond must start to put in place strategic workforce-planning capabilities, lifelong-learning systems, gender parity and diversity initiatives, and social safety nets, if the new drivers of growth are to work for all.

A new ‘north star’ for growth

The current economic climate demands a paradigm shift in how we think about growth.

By creating a new ‘north star’ that measures both the speed and quality of growth, and by fostering closer economic collaboration between North and South, we will see benefits for everyone. We would also see that it is possible not just to reverse the trend of steady decline in global growth since 2008, but to create a new economic model that works for all.

1,000 leaders from business, government and academia explored pathways for growing amid complexity at the World Economic Forum’s Special Meeting on Global Collaboration, Growth and Energy for Development.

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Economic GrowthGeo-Economics and Politics
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