The global economy will expand by less than 3 percent a year through 2032, compared to an average of 3.6 percent before the COVID era, then gradually decline until at least 2075, according to a new forecast by analysts at Goldman Sachs.
“Our projections imply that we have passed the high-water mark of global potential growth,” the analysts wrote in their 45-page study. “Most of this projected slowdown is due to demographics. Global population growth has halved over the past 50 years.”
Since 1972, the world’s population has slowed from growing by 2 percent annually to less than 1 percent now and population growth will almost flatline by 2075, the study predicts.
That will be “a good problem to have” because it relieves pressure on natural resources and the environment, but also presents “a number of economic challenges,” including covering costs of healthcare and other services for a growing number of elderly.
Boosting productivity usually can be relied on to spur growth with fewer workers, but productivity in developed and emerging economies also has been declining in recent years, the report said.
In the U.S., for example, productivity per worker managed a 0.3-percent gain in this year’s third quarter, but fell sharply during the first half of this year. At the same time, labor costs have been rising sharply, notching an 8.9-percent increase in 2022’s second quarter.
“It seems unlikely that the global economy will regain the rates of productivity growth achieved during the 2000-2010 decade,” the analysts wrote. “Moreover, the possibility of an outright reversal is a key risk to the global outlook.”
Among the study’s other forecasts:
● China, Germany, India, Indonesia, and the U.S. will post the most robust economies in terms of dollar value, with Egypt, Nigeria, and Pakistan possibly creating a second tier.
● The dollar’s value will shrink as other nations’ economies expand over time.
● Income inequality among countries will decrease, but will increase within individual nations.