Will the 2010s be viewed as a period of global growth and stability?
Now that we are well into in the last year of this decade, it seems like a good moment to take stock of what has happened to global economic growth in the second decade of this century. Given all the change this decade has seen, it comes as a surprise to find that the average annual rate of global economic growth over the decade has been similar to that of the previous decade. And it may be even more of a surprise to learn that the year-on-year variation in annual global GDP growth has been very small.
Table 1 shows annual average GDP growth rates by decade. Based on the average annual growth rate, this decade looks very similar to last decade. But the variability of annual growth rates over the decade has been much smaller. Steady global growth with little volatility – what’s not to like?
The pattern of global annual GDP growth over the past four decades shown in figure 1 makes clear that when comparing decades the comparison is substantially affected by the effect of the Great Recession and its immediate aftermath. Omitting the recession-hit final years of last decade and the expansion in the very early years of this decade gives a rather different reading. This is shown in table 2 and figure 2.
Figure 2 makes the point that global annual growth was much stronger during most of the 2000s than it has been in most of the current decade and in the previous two decades, before being hit by the Great Recession. Since the early years of the recovery from the financial crisis and recession, average annual global GDP growth in most of this this decade has been 1 percentage point lower than in most of the previous decade. Indeed, it has moved down to a pace closer to that seen in the 1980s and 1990s. The variations in global growth on a year to year basis have also been much smaller than a decade earlier.
If we had been expecting the 4.5% average annual GDP growth seen in most of the 2000s to continue, then we would now feel disappointed. But with annual global output growth averaging 3.5% a year over most of this decade, even though it does not feel like it, we may eventually come to think of this decade of one of global growth and stability.