World economic growth is running 0.4 percentage points below the 2010-2019 average

That may not sound like alot. But it makes a big difference in the long-run as I explain below. First, see World Bank says the global is economy is growing steadily, but not fast enough to help ease poverty by By PAUL WISEMAN of The Associated Press. Excerpts:

"The global economy is growing steadily in the face of war, protectionist trade policies and high interest rates. It just isn’t growing fast enough to bring relief to the world’s poorest, the World Bank said Thursday in its latest assessment of the global economy.

The bank expects the world economy to expand 2.7% in 2025 and again in 2026. It’s a remarkably consistent performance – matching 2023 and 2024 – but also a lackluster one. Growth is running 0.4 percentage points below the 2010-2019 average. The slump reflects lingering damage from the “adverse shocks of recent years,’’ including COVID-19 and Russia’s invasion of Ukraine.

The bank’s latest Global Economics Prospects report, which comes out in January and June, did offer some good news. Global inflation, which was running over 8% two years ago, is expected to slow to an average of 2.7% in 2025 and 2026, close to many central bank targets."

"The World Bank noted that growth has been decelerating for years in the developing world – from a robust average of 5.9% a year in the 2000s to 5.1% in the 2010s to just 3.5% in the 2020s. Excluding China and India, those countries are lagging behind the world’s wealthy countries in per-capita economic growth."

That might not seem like a big deal, just 0.4% less than expected. In my macro courses we read a chapter in the book The Economics of Macro Issues. The chapter discussed how nations with common law systems, where property rights are better protected than in nations with civil law systems, have higher growth rates. I pointed out to my classes that even a small difference in growth rates ends up causing a very big difference in per capita incomes due to the annual compounding effect.

The table below shows how much per capita income would be at various rates after 100 and 200 years. Assume we start with a per capita income of $1,000. If we grow 2.0% per year, after 100 years it will be $7,245. At 2.1% per year, it would be $7,791 or about $700 more. That is how much that little .1% matters. The difference over 200 years is about $11,000. After 100 years at 2.5% per year, per capita income would be $11,814. That is $4,000 more than the 2.0% rate. Small differences in growth rates add up to big differences over time.

If a country has a $10,000 per capita GDP right now and grows 3.1% per year over the next 30 years, it will be at $24,990. If it only grows 2.7% it will be at $22,239 or $2,751 less. That amount means alot to people in low income countries.

Per Capita Income After 100 and 200 Years At Various Annual Growth Rates (Starting With $1,000)