Global Growth

Global growth is projected to slow significantly in the second half of this year, with weakness continuing in 2024. Inflation pressures persist, and tight monetary policy is expected to weigh substantially on activity. The possibility of more widespread bank turmoil and tighter monetary policy could result in even weaker global growth. Rising borrowing costs in advanced economies could lead to financial dislocations in the more vulnerable emerging market and developing economies (EMDEs). In low-income countries, in particular, fiscal positions are increasingly precarious. Comprehensive policy action is needed at the global and national levels to foster macroeconomic and financial stability. Among many EMDEs, and especially in low-income countries, bolstering fiscal sustainability will require generating higher revenues, making spending more efficient, and improving debt management practices. Continued international cooperation is also necessary to tackle climate change, support populations affected by crises and hunger, and provide debt relief where needed. In the longer term, reversing a projected decline in EMDE potential growth will require reforms to bolster physical and human capital and labor-supply growth.

As this report is being published, the world is going through unprecedented times. COVID-19, a term that did not exist when this study was being undertaken over 2019, is now ubiquitous, even though the scale and nature of its global impact will not be known for months to come. As of the second quarter of 2020, a third of the global population has been under a lockdown, with over 200 countries affected by health and economic burdens in diverse ways. Businesses, governments and citizens across the world want to leave the humanitarian and economic crisis behind as soon as possible. To successfully navigate through the COVID crisis and a post-COVID world, a premium will be placed on innovation, the willingness of organizations to disrupt themselves, and active collaboration. In the context of this seismic change, the World Economic Forum Platform for Shaping the Future of Consumption aims to accelerate the responsible transformation of the consumption landscape by enabling consumer well-being, environmental sustainability, inclusive growth models, and trust and transparency among all stakeholders. The mission and transformation goals of the Future of Consumption platform developed three years ago are now more relevant than ever to ensure positive benefits for business and society, across developed and emerging markets. It is an imperative that we advance progress with speed to build a prosperous future for all. In a post-COVID era over the next decade, accelerated shifts in global forces, more than 1 billion first-time consumers and the Fourth Industrial Revolution will continue to change the landscape of consumption in the fast-growth consumer markets of China, India and the ASEAN region. Both business and political leaders will be required to adapt their strategies to the changing needs and demands of connected and empowered consumers. The Future of Consumption in Fast-Growth Consumer Markets, a multi-year project, has focused on the evolution of consumption in emerging markets that comprise more than 40% of the world’s population. Critical foresights on drivers of growth and levers of inclusivity can benefit global leaders as they grapple with similar issues.

The fable of the boiling frog provides a salutary lesson for business leaders. In this apocryphal story, a frog placed in cold water remains in the water as the temperature is gradually increased to boiling. In failing to notice the gradual but real change in its circumstances, the frog dooms itself to a catastrophic ending. Although frogs do not behave this way in real life, humans often do. Neurobiologically conditioned, as we are, to pay attention to stark contrasts and sudden changes, we often overlook slow moving changes in our environments that may herald disastrous consequences.The evolution of infectious disease risk is one such change. As this report explains, the number and diversity of infectious disease outbreaks are gradually but inexorably increasing, as is their capacity to send shocks through our global economic systems. As we travel, trade and communicate across an increasingly hyperconnected global economy, more and more companies will find themselves exposed to the effects of outbreaks that begin thousands of miles away.

The ECRI Statistical Package 2019 provides data on outstanding credit granted by monetary-financial institutions (MFIs) to households and non-financial corporations (NFCs) for the period from 1995 to 2018. Credit volumes and annual growth rates are broken down by sector and credit type to enable detailed insights into credit market developments over time and across countries. It comprises 45 countries including the EU Member States, EU candidate and EFTA countries as well as the US, Canada, Japan, Australia, Russia, Mexico and Saudi Arabia. 2018, loans to EU households and non-financial corporations(NFC) increased by 2.7%, the second consecutive year of the expansion.For the fourth year in a row, total loans in New Member States (NMS) grew faster than in old Member States (EU-15). Compared to the previous year, the total loans growth rate in 2018 accelerated from 2.2% to 2.7% in EU-15, while it slowed from 5.9% to 3.5% in NMS. Between 2017 and 2018, household loans increased by 2.8% and non-financial corporations (NFC) loans increased by2.6%. Total household loans grew most in in Slovakia (+11%), Romania (+9%) and Lithuania (+8%), while the largest contractions were registered in Cyprus (-31%), Greece (-7%) and Latvia (-5%). Finland (+19%), Hungary (+19%) and Luxembourg (+11%) were amongst the Member States with the largest growth rates in NFC loans. In turn, significant reductions were registered inalia, Russia, Mexico and Saudi Arabia.

This report is the result of a collaboration between members of the World Economic Forum Council on Advanced Manufacturing and Production. It summarizes the main findings of work conducted on the application of advanced manufacturing and digital technologies on future production and supply-chain models. The applications set out in this paper highlight the importance of collaborations across supply-chain partners as crucial to technology adoption and exploitation. Five advanced manufacturing transformations are presented that offer real-world examples of how advanced manufacturing and digital technologies are driving new supply-chain capabilities achieved through supplier-producer-user collaboration. These five transformations, while not aiming to be exhaustive, demonstrate 1) smart manufacturing, 2) flexible supply chains, 3) authentication and consumer engagement, 4) supply chain visibility and resilience, 5) remanufacturing, reduce, reuse and recycling.

The past 50 years was a period of exceptionally rapid economic expansion. Average per capita income almost tripled, and the global economy expanded sixfold in GDP terms. But the long-term growth outlook is extremely uncertain. Some observers raise the issue of challenging demographics; they talk about “secular stagnation” and express doubts about whether future growth can match its rapid upward trajectory of recent decades. Others point to the transformative impact of technology and paint a more optimistic picture. The debate about growth goes even deeper and broader than this. Many question whether—and how—growth can be sustainable and inclusive. There is a lively discussion about whether GDP is the right measure of growth. Amid such debate, it is difficult for policy makers and businesses to respond effectively.

In this report, the McKinsey Global Institute (MGI), which has studied growth in 30 industries in more than 20 countries over the past 25 years, reviews patterns of global growth over the past half century, focusing on the two key drivers of that growth—labor and productivity. Our broad finding is that, in the face of declining population growth that is putting pressure on the pool of available labor, the rate of GDP growth is set to be 40 percent lower than its rate over the past 50 years. To compensate fully for weakening labor growth would require productivity growth to accelerate by 80 percent from its historical rate. Drawing on five detailed sector case studies, we find that it is possible—but extremely challenging—to boost productivity growth by this margin. However, aggressive action would be needed to enhance competitiveness, harness technology, mobilize labor and further open up and integrate the world economy. Collectively, we need to engage in a frank conversation about the tough trade-offs that such action would entail.