July 2024 | Global growth has been on a secular decline since around 2000, with a more pronounced decline following the Global Financial Crisis. To explain this, economists typically cite the sizeable and broad-based slowdown in Total Factor Productivity Growth, which measures how efficiently labor and capital inputs are used to produce output. Looking back over longer periods, there were strong advances in productivity after WW2 in the advanced economies in the 1970s to the 90s, but since around 2000, there has been a broad-based slowdown. If these trends continue, global growth over the next decade will likely be sub-3%, compared to just under 4% in the two decades before the pandemic, even before considering recent adverse developments such as global economic fragmentation, increasing security concerns and the transition to net zero. In this paper, we analyze the contributing factors and economic risks.
01 | The long-term outlook for global growth is not promising, largely determined by declining working-age populations and weak investment.
02 | The secular decline in productivity growth, especially in advanced economies is unlikely to improve in the near term.
03 | Artificial intelligence is promising, but its macroeconomic impact will take longer to move the productivity needle.
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