World Bank thinks 2020s is 'lost decade' for developing economies
What's the story
The World Bank has warned that the 2020s could be a "lost decade" for many developing economies. The warning comes in the institution's June 2026 'Global Economic Prospects' report, which highlights weak growth, rising debt, slowing investment and repeated global shocks as major hurdles. These factors have made it difficult for poorer nations to reduce their income gap with wealthier countries.
Delay
Many poorer nations far behind expected development progress
The World Bank report highlights that many poorer nations are still far behind their expected development progress since the COVID-19 pandemic. "The 2020s will prove to be what their ominous opening foreshadowed: a lost decade--not just for a couple of outliers, but for dozens of developing economies," said Indermit Gill, Chief Economist at the World Bank.
Development stagnation
'1 in 2 developing economies has not advanced since 2019'
The World Bank report notes that nearly one in two developing economies has not advanced since 2019. This is despite the most basic promise of development: closing the income gap with the world's richest economies. The institution warns that by end-2026, "one-quarter of developing economies, one-third of low-income economies, and half of fragile and conflict-affected economies will be poorer than they were in 2019 on the eve of the COVID-19 crisis."
Economic challenges
Rising financial pressures
The World Bank report highlights rising financial pressures in developing economies. It says "government debt in developing economies has surged to all-time highs," and "private investment growth in the 2020s has more than halved relative to the 2010s." These trends are worrying as they threaten long-term convergence between poorer and richer economies.
Income recovery
Per-capita income in developing economies unlikely to recover
The report predicts that per-capita income in emerging market and developing economies (excluding China and India) relative to advanced economies is unlikely to return to pre-pandemic levels before 2028. This suggests nearly a decade of lost income convergence. The institution also warns that weaker growth prospects are limiting governments' ability to address poverty and development challenges effectively.
Policy intervention
Urgent policy action needed to boost growth
The report stresses the need for urgent policy action to boost growth, enhance fiscal sustainability and create jobs. Without reforms, many developing economies could continue to lag behind their richer peers for the rest of the decade. Despite these challenges, Gill remains hopeful about AI, clean energy investment and regional trade integration as potential catalysts for stronger growth in the coming years.