Global economic growth in 2020 is expected to grow at a rate of around 3.4% in purchasing power parity terms compared to its long-term average of a 21st century average of 3.8% per year, according to new projections by PwC.
PwC predict that 2020 will be a year of ‘slowbalisation’ in the global economy, where trade tensions continue to create challenges for global supply chains and further integration of the global economy.
Nevertheless, PwC expect that services will remain a bright spot for global trade, with the total global value of service export forecast to hit a record $7 trillion in 2020. The US and UK are likely to remain the leading exporters of services, although China is expected to overtake France in fourth place during the year.
Uncertain outlook for global trade
The overall picture for 2020 is that global economic growth will continue at a modest pace, as the major economies will be buoyed by accommodative financial conditions and an increased reliance on household consumption as a source of growth instead of net exports and investment.
Barret Kupelian, senior economist at PwC UK, says,
‘Globalisation has been a defining feature of the global economy since the 1970s. Yet the global volume of merchandise traded slowed down dramatically and even went into reverse in 2019. Coupled with the effective disbandment of the World Trade Organization’s (WTO) dispute settlement mechanism in December, we can expect more challenging times ahead for global trade.
‘Yet we should be clear this is a period of “slowbalisation”—with integration and trade flows still growing but at a slower rate. Given the links between merchandise trade flows and economic growth, we can expect to see a similar effect of below-average growth in the global economy in 2020.’
More jobs across the board but not necessarily spread equitably
PwC expect the G7 to continue to create jobs, to the tune of around 2 million. Four out of the five new jobs in the G7 will be created in the US, UK and Japan. As the pool of labour resources in the G7 gradually dries up, earnings will continue their upward trajectory. But in the absence of productivity improvements, corporate profit margins could be squeezed.
Similarly, the International Labour Organization (“ILO”) expects the seven largest emerging economies– the E7–to create about 8 million jobs in net terms. The ILO’s employment projections for the G7 show that jobs will be taken up by men and women in equal measure. Within the E7, however, the ILO expects job creations to be less evenly distributed across genders.
India expected to rise in global economic rankings
According to the IMF’s latest estimates, 2019 was the year when India overtook the UK and France to become the fifth largest economy in the world. This is an ongoing process with India likely on current trends to overtake Germany before 2025 and Japan before 2030 to become the world’s largest economy behind China and the US. France and the UK will now vie for sixth place in the rankings, with their relative position dependent on the value of the pound against the euro which may remain volatile in 2020
US oil production equivalent to half of OPEC
Global renewable energy and nuclear consumption will make up more than 20% of global energy consumption, which is the highest it has ever been. The rise of renewable energy reflects how businesses, households and governments are adapting and changing their attitudes.
China is expected to be the largest consumer of this type of energy closely followed by Europe. However, oil is expected to continue to remain the most preferred source of energy in 2020 for the world economy followed by coal and natural gas. The US and China will remain the largest consumer of oil in the world in 2020.
Global population biggest it has ever been but also the greyest
In 2020, the world’s population is expected to reach 7.7 billion, which is around a 10% increase compared to a decade ago. China, India and Sub-Saharan Africa are expected to drive around half of the world’s annual population increase. At the same time, the number of people above the age of 60 globally is expected to surpass the one billion mark. China is expected to have a larger number of people above the age of 65 than all the six other largest emerging economies put together.
Up to a Quarter of Jobs Expected to Change in Next Five Years
The Future of Jobs Report 2023 suggests that almost a quarter of jobs (23%) are expected to change in the next five years through growth of 10.2% and decline of 12.3%. According to the estimates of the 803 companies surveyed for the report, employers anticipate 69 million new jobs to be created and 83 million eliminated among the 673 million jobs corresponding to the dataset, a net decrease of 14 million jobs, or 2% of current employment.
Macrotrends, including the green transition, ESG standards and localization of supply chains, are the leading drivers of job growth, with economic challenges including high inflation, slower economic growth and supply shortages posing the greatest threat. Advancing technology adoption and increasing digitization will cause significant labour market churn, with an overall net positive in job creation.
“For people around the world, the past three years have been filled with upheaval and uncertainty for their lives and livelihoods, with COVID-19, geopolitical and economic shifts, and the rapid advancement of AI and other technologies now risks adding more uncertainty,” said Saadia Zahidi, Managing Director, World Economic Forum. “The good news is that there is a clear way forward to ensure resilience. Governments and businesses must invest in supporting the shift to the jobs of the future through the education, reskilling and social support structures that can ensure individuals are at the heart of the future of work.”
From the “robot revolution” to algorithm Armageddon?
While technology continues to pose both challenges and opportunities to labour markets, employers expect most technologies to contribute positively to job creation.
The fastest growing roles are being driven by technology and digitalization.Big data ranks at the top among technologies seen to create jobs, with 65% of survey respondents expecting job growth in related roles. The employment of data analysts and scientists, big data specialists, AI machine learning specialists and cybersecurity professionals is expected to grow on average by 30% by 2027. Training workers to utilize AI and big data will be prioritized by 42% of surveyed companies in the next five years, ranking behind analytical thinking (48%) and creative thinking (43%) in importance. Digital commerce will lead to the largest absolute gains in jobs: approximately 2 million new digitally enabled roles are expected, such as e-commerce specialists, digital transformation specialists, and digital marketing and strategy specialists.
At the same time, the fastest declining roles are also being driven by technology and digitalization, with clerical or secretarial roles including bank tellers, cashiers and data entry clerks expected to decline fastest.
The Future of Jobs Report 2023 suggests that tasks are seen as no more automated now than they were three years ago when the report was last published. About a third of tasks (34%) are currently automated, just 1% above the 2020 figure. Surveyed companies also revised down their expectations for further automation, to 42% of tasks by 2027, compared to 2020 estimates of 47% of tasks by 2025.
But while expectations of the displacement of physical and manual work by machines has decreased, reasoning, communicating and coordinating – all traits with a comparative advantage for humans – are expected to be more automatable in the future. Artificial intelligence, a key driver of potential algorithmic displacement, is expected to be adopted by nearly 75% of surveyed companies and is expected to lead to high churn – with 50% of organizations expecting it to create job growth and 25% expecting it to create job losses.
Rise of green, education and agriculture jobs
Investment in the green transition and climate-change mitigation, as well as increasing consumer awareness of sustainability issues are driving industry transformation and opening new opportunities in the labour market. The strongest net job-creation effects are expected to be driven by investments that facilitate the green transition of businesses, with more than half of respondents expecting it. As countries seek more renewable energy sources, roles including renewable energy engineers and solar energy installation and systems engineers will be in high demand.
Investment will also drive growth in more generalist sustainability roles, such as sustainability specialists and environmental protection professionals, which are expected to grow by 33% and 34% respectively, translating to growth of approximately 1 million jobs.
However, the largest absolute gains in jobs will come from education and agriculture. The report finds that jobs in the education industry are expected to grow by about 10%, leading to 3 million additional jobs for vocational education teachers and university and higher education teachers. Jobs for agricultural professionals, especially agricultural equipment operators, graders and sorters, are expected to see a 15%-30% increase, leading to an additional 4 million jobs.
Indeed, a Recruit Holdings company, finds that while demand for social jobs such as those in health and education have grown faster during the pandemic, these job openings are harder to fill than others.
“At Recruit, we believe we must continue to embrace AI and technology to help job seekers and employers as we navigate near-term macroeconomic headwinds and long-term labour market challenges,” said Hisayuki “Deko” Idekoba, President, CEO and Representative Director of the Board of Recruit Holdings. “We expect a labour shortage to remain for many years ahead, across many sectors and particularly as the population ages. Therefore, it is essential that we identify new ways to simplify the hiring process to support a thriving economy and society where everyone can prosper together.”
Increasing urgency for the reskilling revolution
Companies report that skills gaps and an inability to attract talent are the key barriers to transformation, showing a clear need for training and reskilling across industries. Six in 10 workers will require training before 2027 but only half of employees are seen to have access to adequate training opportunities today. At the same time, the report estimates that, on average, 44% of an individual worker’s skills will need to be updated.
The gap between workers’ skills and future business needs puts the onus on companies and governments to enable learning and reskilling opportunities. Government funding for skills training would help connect talent to employment, according to 45% of businesses surveyed.
For example, while there is continued growth in green jobs in the past four years, as indicated by additional research conducted by LinkedIn for this year’s report, reskilling and upskilling towards green skills is not keeping pace.
“The sustained growth of green jobs is really great news, particularly for job seekers who are facing upheaval in the labour market,” said Sue Duke, Head of Global Public Policy, LinkedIn. “But LinkedIn’s data is clear that while there’s strong demand for talent with green skills, people are not developing green skills at anywhere near a fast enough rate to meet climate targets. There is an opportunity for everyone to help turn this around. Governments must champion the green skills agenda and businesses can and must do more to equip their employees with the skills needed to deliver genuine environmental change.”
In response to the cost-of-living crisis, 36% of companies recognize that offering higher wages could help them attract talent. Yet, companies are planning to mix both investment and displacement to make their workforces more productive and cost-effective. Four in five surveyed companies plan to invest in learning and training on the job as well as automating processes in the next five years. Two thirds of companies expect to see a return on investment on skills training within a year of the investment, whether in the form of enhanced cross-role mobility, increased worker satisfaction or improved worker productivity.
Strong cognitive skills are increasingly valued by employers, reflecting the growing importance of complex problem-solving in the workplace. The most important skills for workers in 2023 are seen to be analytical thinking and creative thinking, and this is expected to remain so in the next five years. Technological literacy, and AI and big data specifically, will become more important and company’s skills strategies will focus on this in the next five years.
Faster reskilling is necessary – and possible. “Our research found that individuals without degrees can acquire critical skills in a comparable timeframe to those with degrees, highlighting the potential for innovative approaches such as industry micro-credentials and skills-based hiring to tackle skills gaps and talent shortages,” said Jeff Maggioncalda, CEO, Coursera. “However, it will require collective action from public and private sectors to provide the affordable, flexible reskilling pathways at scale that displaced workers need to transition into jobs of the future.”
“The latest findings in the Future of Jobs Report renew calls for action from all labour market stakeholders,” said Sander van ‘t Noordende, CEO, Randstad. “Acceleration in digitalization, AI and automation are creating tremendous opportunities for the global workforce, but employers, governments and other organizations need to be ready for the disruptions ahead. By collectively offering greater skilling resources, more efficiently connecting talent to jobs and advocating for a well-regulated labour market, we can protect and prepare workers for a more specialized and equitable future of work.”
Global Economy’s “Speed Limit” Set to Fall to Three-Decade Low
The global economy’s “speed limit”—the maximum long-term rate at which it can grow without sparking inflation—is set to slump to a three-decade low by 2030. An ambitious policy push is needed to boost productivity and the labor supply, ramp up investment and trade, and harness the potential of the services sector, a new World Bank report shows.
The report, Falling Long-Term Growth Prospects: Trends, Expectations, and Policies, offers the first comprehensive assessment of long-term potential output growth rates in the aftermath of the COVID-19 pandemic and the Russian invasion of Ukraine. These rates can be thought of as the global economy’s “speed limit.”
The report documents a worrisome trend: nearly all the economic forces that powered progress and prosperity over the last three decades are fading. As a result, between 2022 and 2030 average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of this century—to 2.2% a year. For developing economies, the decline will be equally steep: from 6% a year between 2000 and 2010 to 4% a year over the remainder of this decade. These declines would be much steeper in the event of a global financial crisis or a recession.
“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics. “The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times—stubborn poverty, diverging incomes, and climate change. But this decline is reversible. The global economy’s speed limit can be raised—through policies that incentivize work, increase productivity, and accelerate investment.”
The analysis shows that potential GDP growth can be boosted by as much as 0.7 percentage points—to an annual average rate of 2.9%—if countries adopt sustainable, growth-oriented policies. That would convert an expected slowdown into an acceleration of global potential GDP growth.
“We owe it to future generations to formulate policies that can deliver robust, sustainable, and inclusive growth,” said Ayhan Kose, a lead author of the report and Director of the World Bank’s Prospects Group.“A bold and collective policy push must be made now to rejuvenate growth. At the national level, each developing economy will need to repeat its best 10-year record across a range of policies. At the international level, the policy response requires stronger global cooperation and a reenergized push to mobilize private capital.”
The report lays out an extensive menu of achievable policy options, breaking new ground in several areas. It introduces the world’s first comprehensive public database of multiple measures of potential GDP growth—covering 173 economies from 1981 through 2021. It is also the first to assess how a range of short-term economic disruptions—such as recessions and systemic banking crises—reduce potential growth over the medium term.
“Recessions tend to lower potential growth,” said Franziska Ohnsorge, a lead author of the report and Manager of the World Bank’s Prospects Group. “Systemic banking crises do greater immediate harm than recessions, but their impact tends to ease over time.”
The report highlights specific policy actions at the national level that can make an important difference in promoting long-term growth prospects:
Align monetary, fiscal, and financial frameworks: Robust macroeconomic and financial policy frameworks can moderate the ups and downs of business cycles. Policymakers should prioritize taming inflation, ensuring financial-sector stability, reducing debt, and restoring fiscal prudence. These policies can help countries attract investment by instilling investor confidence in national institutions and policymaking.
Ramp up investment: In areas such as transportation and energy, climate-smart agriculture and manufacturing, and land and water systems, sound investments aligned with key climate goals could enhance potential growth by up to 0.3 percentage point per year as well as strengthen resilience to natural disasters in the future.
Cut trade costs: Trade costs—mostly associated with shipping, logistics, and regulations—effectively double the cost of internationally traded goods today. Countries with the highest shipping and logistics costs could cut their trade costs in half by adopting the trade-facilitation and other practices of countries with the lowest shipping and logistics costs. Trade costs, moreover, can be reduced in climate-friendly ways—by removing the current bias toward carbon-intensive goods inherent in many countries’ tariff schedules and by eliminating restrictions on access to environmentally friendly goods and services.
Capitalize on services: The services sector could become the new engine of economic growth. Exports of digitally delivered professional services related to information and communications technology climbed to more than 50% of total services exports in 2021, up from 40%in 2019. The shift could generate important productivity gains if it results in better delivery of services.
Increase labor force participation: About half of the expected slowdown in potential GDP growth through 2030 will be attributable to changing demographics—including a shrinking working-age population and declining labor force participation as societies age. Boosting overall labor force participation rates by the best ten-year increase on record could increase global potential growth rates by as much as 0.2 percentage point a year by 2030. In some regions—such as South Asia and the Middle East and North Africa—increasing female labor force participation rates to the average for all emerging market and developing economies could accelerate potential GDP growth by as much as 1.2 percentage points a year between 2022 and 2030.
The report also underscores the need to strengthen global cooperation. International economic integration has helped to drive global prosperity for more than two decades since 1990, but it has faltered. Restoring it is essential to catalyze trade, accelerate climate action, and mobilize the investments needed to achieve the Sustainable Development Goals.
Economic Diversification Away from Oil is Crucial for the Republic of Congo
Economic diversification away from oil is crucial for reversing recent economic setbacks in the Republic of Congo and put the country on a pathway to long-term prosperity, says the World Bank in its latest Country Economic Memorandum report on the country.
The cost of over-reliance on oil has been painfully apparent in the past decade. A seven-year recession, induced by the end of the last oil-boom cycle, has led to a dramatic drop in income per capita, shrunk the size of the economy and weakened long-term growth prospects. While oil prices have surged more recently, returning Congo’s economy to growth in 2022, the current development model is unlikely to deliver sustainable economic growth and productive jobs going forward.
Attaining sustainable development in Congo urgently requires efforts to diversify national assets, focusing on stronger institutions, development of human and physical capital, and a more balanced exploitation of natural resources, says the report, titled Congo’s Road to Prosperity: Building Foundations for Economic Diversification.
“Congo’s oil-driven growth model has run its course. In order to achieve its aspiration for a more diversified and inclusive model, it is crucial for Congo to strengthen its policy ambition and accelerate efforts to transition to a people-centered, diversified economy,” said Korotoumou Ouattara, World Bank Resident Representative for the Republic of Congo.
The report highlights the urgency of diversification actions. Congo’s oil production is expected to decline in the medium term due to the depletion of oil reserves and reduced external demand from the global transition to a low-carbon economy. While oil accounts for 40% of GDP, the sector employs only a fraction of the country’s workforce, with three-quarters of Congolese employed in the informal sector. Underinvestment in health, education, and physical infrastructure, as well as weak government institutions underscore the limits of fossil fuel-driven growth and the importance of economic diversification.
It identifies ways in which Congo can achieve its economic diversification objectives and recommends policy reforms and investments in the following priority areas:
- Remove barriers to competition by curbing state-owned enterprises’ market dominance, encouraging private sector participation in the electricity and telecommunications sectors, and modernizing competition law and enforcement capacity.
- Accelerate digital transformation by enabling private sector participation, developing regulatory and legal support for digital financial services and facilitating digital technology adoption, and building digital skills.
- Improve the supply of reliable electricity by restoring profitability, invigorating regulation, and investing in transmission and distribution.
- Enhance trade competitiveness and diversification by cutting tariffs, reviewing non-tariff measures, concluding regional trade negotiations, and strengthening local markets.
- Improve logistics efficiency by scrutinizing public-private partnership contracts and adopting unified information technology for maritime trade.
- Support ecotourism development by improving regulation and allocating funding to protect natural assets, strengthening regulatory and enforcement agencies, and expanding transport infrastructure and marketing.
“The recent oil price volatility is a strong reminder of the need for Congo to reduce its exposure to the boom-bust cycles of global commodity markets. Urgent policy actions to develop the non-oil sector, enable the private sector, and strengthen government institutions can help catalyze growth for a prosperous, resilient and sustainable future,” said Vincent Belinga, lead author of the report.
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