How to rewire economic growth for a new era

Since the 2007 financial crisis, global growth has lost momentum. On average, GDP growth has declined from more than 2% in advanced economies and nearly 6% in emerging and developing economies in the early 2000s to less than 1.5% and less than 2%, respectively, in the post-COVID period.

This slowdown has been compounded by a succession of crises – geopolitical, financial, environmental – that have raised questions not just about the wisdom of prevailing approaches to stimulating economic growth, but about the goals and values underpinning it.

Reigniting global growth will be essential to addressing looming challenges.

Yet a short-term focus on growth at all costs has in the past contributed to environmental damage, exacerbated inequality, and removed resilience safeguards in pursuit of maximum efficiency.

The question is not whether the world needs more growth, but the extent to which the underlying nature of the growth that is needed can also advance other important priorities.

To help respond, the World Economic Forum is introducing a new quantitative framework that complements traditional growth metrics and develops a more holistic view of the quality of growth. It is grounded in four pillars: innovativeness, inclusiveness, sustainability and resilience.

Today, we see that the world economy is halfway towards an ideal trajectory of fully innovative, inclusive, sustainable and resilient growth. At an individual level, no economy has attained a pillar score higher than 80 on any of the framework’s four dimensions, where 100 is the theoretical maximum outcome possible.

High income economies, with an average GDP of $52,475 per capita (at purchasing power parity) in 2023, saw average annual GDP per capita growth of 1.01% over the past five years, 2018-2023. Their growth pathway is generally characterized by high scores on inclusiveness (68.9), innovativeness (59.4) and resilience (61.9), but room to improve on sustainability (45.8).

Countries in this group include Australia, Canada, France, Germany, Italy, Japan, Saudi Arabia, South Korea, the United Kingdom and the United States. Notable high scores include Switzerland (80.4), Singapore (76.4) and the United States (74.1) on innovativeness; Finland (77.7) and Canada (75.8) on inclusiveness; Sweden (60.9), Germany (56.3) and the United Kingdom (54.0) on sustainability; and Australia (69.5) and Japan (66.3) on resilience.

Common challenges preventing a stronger balanced growth performance of this group include talent availability, access to equal workplace opportunities, slow development and adoption of green technologies, and insufficient reskilling and lifelong learning.

Upper middle-income economies, with an average GDP of $17,900 per capita in 2023, saw average annual GDP per capita growth of 1.32% over the past five years. Their growth pathway generally features a relatively high emphasis on inclusiveness (54.8) and resilience (50.0), with room to improve on sustainability (44.0) and innovativeness (39.3).

Countries in this group include Argentina, Brazil, Indonesia, Mexico, South Africa and Türkiye. Notable high scores include Malaysia (52.3) and South Africa (44.1) on innovativeness; Brazil (56.0) and Costa Rica (48.8) on sustainability; and Indonesia (57.9) on resilience.

Common challenges preventing a stronger balanced growth performance of this group include research capacity, wealth and income inequality, high non-renewable energy intensity and waste production, and financial stability.

Lower middle-income economies, with an average GDP of $7,633 per capita in 2023, saw average annual GDP per capita growth of 1.95% over the past five years. Their growth pathway has generally been focused on resilience (45.8), with higher scores on sustainability (50.0) than richer economies but room to improve on inclusiveness (44.8) and innovativeness (34.9).

Countries in this group include Bangladesh, Egypt, India, Nigeria, Pakistan, the Philippines and Viet Nam. Notable high scores include Jordan (45.1) on innovativeness; Viet Nam (56.2) on inclusiveness; Kenya (57.2) and India (56.0) on sustainability; and the Philippines (54.1) on resilience.

Common challenges preventing a stronger balanced growth performance of this group include technology absorption, lack of social safety nets, insufficient investment in renewable energy and insufficient healthcare system capacity.

Low-income economies, with an average GDP of $1,533 per capita in 2023, saw average annual GDP per capita growth of just 0.22% over the past five years. Their growth pathway is generally characterized by a much lighter environmental footprint per capita – resulting in a high sustainability performance (52.7) – but with room to improve on resilience (39.0), inclusiveness (29.9) and innovativeness (26.8).

Notably high scores are achieved by Rwanda, with a particularly strong emphasis on resilience (52.8). Common challenges preventing a stronger balanced growth performance of this group include ICT capital and connectivity, access to connectivity and healthy nutrition, insufficient environmental regulation and insufficient energy source diversification.

While each country faces its unique set of trade-offs and synergies to design its policy choices, there are some lessons that are near universal.

Most countries are inadequately prepared for demographic change. In high-income economies, talent availability is an increasing bottleneck to further advance innovation. This creates opportunities for trade in services from developing economies that are still largely untapped, partly because of low digitalization.

Digitalization rates across advanced and developing economies are diverging rather than converging, leading to persistent economic divides and missed opportunities for innovation. Digitization – and the infrastructure and services that accompany it – for all is key.

Income inequality has been on the rise for the first time in decades and is currently the most evident headwind to making growth inclusive. Widespread access to basic services like health and lifelong learning, in addition to adequate social protection, will be essential.

Institutional commitments are yet to translate systemic hardwiring of emissions reduction into growth models. Green finance and technology are the missing links on the path to sustainability.

Finally, inward-looking approaches are insufficient for resilience – more open economies still have higher income per capita and bounce back better from shocks. But localized efforts, such as to strengthen financial architecture and food security, are also key.

The World Economic Forum’s Future of Growth Initiative will lead a two-year campaign to support policy-makers in balancing growth, innovation, inclusion, sustainability and resilience.

We need a higher level of urgency and ambition to rewire growth for this new era. Policy-makers across key portfolios – finance, industry, economy, trade, planning, environment, and labour – need to take notice.