Economic growth is referred to as the growth of real gross domestic product (GDP) over time. Although several financial crises have hit the global economy, it still shows a positive trend. This paper aims to examine the current world’s economic growth and some of the factors that impede it.
World population and economic growth
According to UNCTAD (2018), as of 2016, the world population was 7.55 billion with 58% of the individuals living in only ten economies. Three of the four most populated economies were located in Asia. These include China, Indonesia, and India. Moreover, of the 7.55 billion people, 6.1 billion, that is 80%, inhabited developing economies (UNCTAD, 2018). Over the last six decades, developing economies have witnessed a sharp increase in population growth. Therefore, the global population has been projected to reach approximately 10 billion by 2050 (UNCTAD, 2018).
Moreover, the world’s economic growth in regards to the GDP is on a positive trend as it has risen from 2.4% in 2016 to 3.1% in 2017 (UNCTAD, 2018). This was the first time since 2011 that the growth rate has been witnessed to supersede 3%. The growth rate is projected to moderate slightly to 3% in 2018. However, not all regions of the world recorded a high economic growth rate in 2017 (UNCTAD, 2018). Unlike developing economies such as Asia and Oceania which witnessed a 5.6% growth rate, the U.S. only reached 1.2%.
Why one-sixth of the world’s population has not experienced substantive economic growth over the past 30 years
Over the past 30 years, the world’s economic growth has been in a sluggish phase. As a result, one-sixth of the world’s population has not experienced substantive economic growth. These disparities in economic growth present in both developing and developed economies are attributed to several factors. For instance, unemployment. Developing countries are facing serious issues of unemployment. The effect of unemployment is devastating when coupled with the relative substandard infrastructure present. Moreover, when it comes to developed countries such as the U.S., although the country has a strong economy, the sound financial system has not reached all its citizens. The aggregate data has masked disparities such as income, race, and geography.
The second is political instability. Economic growth and political instability a deeply interconnected. This is because the uncertainty associated with political unrest might reduce investment, thus reducing the pace of economic development. A classic example is the power wrangle that has been in Sudan for the past fifty years where the country has been fluctuating over democracy and military rule (Almosharaf & Tian, 2014). The war cast a negative shadow over Sudan’s economy for years. This is because it pushed away from the present and potential oil investors.
The third is the economic crisis. A country’s debt crisis can also affect economies around the world. It occurs when investors lose confidence hence leading to systemic financial instability which causes inflation and high-interest rates. However, the effect on the global economy is dependent on the size of the country. For example, for large currency-issuing countries like Japan and the U.S., a debt crisis can have massive spillover effects on other countries hence instigating a global economic recession (Reinhart, 2014). Other countries are hit to a degree that is even worse than the U.S.
Although the global economy is on a positive trend, a fraction of the population is not enjoying some of the benefits associated with economic growth. This might be attributed to factors such as unemployment, financial crises and political instability among others. Therefore, it is upon various governments to revise and amend their policies such that all individuals can enjoy the fruits bore by a prosperous economy.
- Almosharaf, H. & Tian, F. (2014). The cause of Sudan’s recent economic decline. IOSR Journal of Economics and Finance, 2(4), 26-40.
- Reinhart, C. M. (2014). Recovery from financial crises: Evidence from 100 episodes. American Economic Review, 1004(5), 50-55.
- UNCTAD. (2018). Handbook of statistics. New York, NY: United Nations Publications. Web.