Image: Karsten Würth on Unsplash.
“Over the longer term, the only way for the world to propel itself out of the low growth environment is through cooperation.”
The world is currently mired in a low growth environment, with the latest IMF forecasts projecting 2.8% global growth in 2023 and 3.0% in 2024 – rates which are well below the average experienced over the past decade. This is in the context of other ongoing fragilities including stubborn inflation, a global debt crisis, geo-economic rivalry, geopolitical conflict and vulnerabilities in the financial sector, among others.
Despite this sobering outlook, or perhaps because of it, it is so crucial not to lose sight of avenues to relaunch growth and put us on a firm trajectory to new competitiveness and resilience. In this respect, I would like to point to three horizons of growth, for short-, medium- and long-term revitalization of the global economy:
Reopened Asian economies
Among the regions hardest-hit by the COVID-19 pandemic, Asia is emerging from a protracted period of muted economic activity and looks set to resume its role as the world’s growth engine. China’s economic opening up earlier this year has provided a much-needed boost to both the regional and global economy.
The reopening of crucial Asian economies at large provides us with immediate growth markets which can serve to spur growth in the short-term, while also establishing a base from which to overcome the low growth environment moving forward.
In comparison with other regions, Asia-Pacific is by far the brightest spot for economic growth at present, with the IMF’s latest estimates projecting the region to contribute 67.4% of all global growth in 2023, and with China alone contributing 34.9% of that total.
The annual growth rate for the region is projected at 4.6% for 2023, representing a significant increase from the 3.8% growth posted last year and especially strong when considering that global growth projections overall are stagnant, if not slowing, hampered by an especially pronounced slowdown in advanced economies. Of particular importance is the region’s manufacturing sector, which plays a crucial role in its economic activity and will have to adapt to the changing investment and consumption appetites affected by this period of transition to ensure its continued growth.
A new generation of entrepreneurship and innovation
Despite global economic fragilities, new ideas, approaches and mindsets inherent to entrepreneurship and innovation can spur the momentum needed to create more equitable, sustainable and resilient growth models. We should also remember that many successful companies were born out of adversity and at times of crisis.
It is thus important that even in the current challenging economic context, continuous funding has been flowing to digital and green industries, which are two essential components to successfully bringing innovation to market. At a macroeconomic level, it is estimated that 70% of all new value created in the global economy over the next decade will be based on digitally enabled platform business models, while the rapid development and adoption of frontier technologies including artificial intelligence and quantum computing will have significant impacts across all sectors of the economy.
As an example, despite a slowdown in global venture capital funding overall, funding for companies engaged with artificial intelligence has expanded significantly and represented about 13% of total new funding in May 2023.
Trade in green goods, meanwhile, reached a record $1.9 trillion in 2022 and will continue to drive growth and new jobs. Activity based around the green economy must continue to accelerate over the medium-term as much work remains to be done. According to the International Energy Agency (IEA), over 40% of the emissions that will need to be cut to reach net zero between 2050 and 2070 must be addressed with technologies that are not currently being implemented at scale and are in the early adoption phase.
This presents a significant opportunity for both business activity and public policy to be re-oriented around sustainability, creating positive growth trajectories out of crisis.
Over the longer term, the only way for the world to propel itself out of the low growth environment is through cooperation.
The global geopolitical environment is experiencing strong headwinds and demonstrating a tendency towards increased fragmentation and polarization. Ultimately, though, the world needs productive and effective cooperation to allow for the trade, investment and exchange of ideas needed to achieve and sustain growth.
The costs of rejecting cooperation are too high. Recent analysis by the IMF puts the long-term costs of severe fragmentation at almost 7% of global output, and highlights disruption in trade as having the potential to negatively impact global living standards as severely as the Covid-19 pandemic. While we will certainly continue to have our differences, persisting with cooperation despite them will secure our future.