Developing world faces looming growth crisis, global economic retreat

By Zion Rufus

Stressing that the world cannot endure another era of emission-heavy growth, President of the World Bank Group, Ajay Banga has called for the urgent need to finance a different world where climate protection, manageable pandemics, food security, and poverty alleviation take precedence, even as he emphasized the necessity for global cooperation and solidarity to overcome these daunting challenges.

Banga, who made this submission at the 2023 Annual Meeting Plenary while addressing a gathering of global leaders with a sobering message about the state of economic growth in the developing world, also highlighted the challenges posed by a complex landscape of interconnected crises.

The World Bank President opened with a stark assessment of the world’s current state, emphasizing the multifaceted challenges that have created a “perfect storm” of issues.

“The world is fraught with profound forces and rapid changes. We face declining progress in our fight against poverty, an existential climate crisis, food insecurity, fragility, a fledgling pandemic recovery, and are feeling the effects of conflicts beyond the front. A perfect storm of intertwined challenges and geopolitical complexity that taken together exacerbate inequality,” he stated.

Of particular concern was the retreat of economic growth in many developing nations. Banga cited a decline from 6 percent to 5 percent over two decades, with projections suggesting it may further decrease to just 4 percent in the next seven years. These economic contractions carry significant human costs; for every lost percentage point, approximately 100 million people fall into poverty, while another 50 million are plunged into extreme poverty.

The situation worsens when examining stagnant incomes in the developing world. Notably, in Sub-Saharan Africa, per capita income remains unchanged from levels 14 years ago. This stagnation has been accompanied by a surge in debt throughout emerging markets, particularly in Africa, where debt has doubled, exacerbating the challenges of economic growth.

Amid these economic difficulties, President Banga lamented the mounting polarization between the Global North and South. The Global South is increasingly apprehensive, feeling the Global North is reneging on promises of resources, enforcing energy regulations unevenly, and relegating a burgeoning generation to perpetual poverty.

Nonetheless, Banga emphasized the urgent need to shift from emission-heavy growth, calling for a concerted effort to build a world where climate protection, pandemic prevention, food security, and the eradication of fragility and poverty are paramount.