World Bank Warns The 2020s Could Become A 'Lost Decade' For Developing Economies. Here's Why

The World Bank has warned that many developing economies risk enduring a “lost decade” as weak growth, rising debt, slowing investment and repeated global shocks continue to hinder efforts to catch up with wealthier nations.

In its latest Global Economic Prospects report released in June 2026, the World Bank said progress made before the COVID-19 pandemic has been severely undermined, leaving dozens of countries struggling to narrow income gaps with advanced economies.

“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,” World Bank Chief Economist Indermit Gill said.

Pandemic Recovery Remains Uneven

According to the report, nearly half of all developing economies have failed

to make meaningful progress in closing the income gap with richer countries since 2019.

The World Bank estimates that by the end of 2026, one-quarter of developing economies, one-third of low-income countries and half of fragile or conflict-affected states will still be poorer than they were before the pandemic.

The report said the setbacks reflect the cumulative impact of the COVID-19 crisis, geopolitical tensions, trade disruptions, inflationary pressures and slower global growth.

Debt and Investment Concerns Grow

The World Bank highlighted mounting financial pressures across emerging and developing economies.

Government debt levels have surged to record highs, while private investment growth has slowed sharply. According to the report, private investment growth during the 2020s has fallen to less than half the pace recorded during the previous decade.

The slowdown has raised concerns about long-term economic development, productivity growth and job creation.

Income Gap May Take Years to Recover

The report projects that per-capita income levels in emerging market and developing economies, excluding China and India, will not return to their pre-pandemic convergence path with advanced economies until after 2028.

This means many countries could experience nearly a decade of stalled progress in narrowing income disparities with wealthier nations.

The World Bank warned that weaker economic growth is also limiting governments’ ability to address poverty, food insecurity and development challenges.

Declining fiscal space and reduced development assistance are making it increasingly difficult for vulnerable countries to support populations facing economic hardship.

AI, Clean Energy Offer Hope

Despite the gloomy outlook, the World Bank said opportunities remain to reverse the trend during the next decade.

The report identified artificial intelligence, clean energy investments and deeper regional trade integration as key drivers that could boost growth and productivity if governments create the right conditions.

“On the upside, broader investment in and adoption of artificial intelligence could lift activity,” the report said.

Gill argued that AI, energy transformation and stronger regional economic integration have the potential to drive significant development gains across emerging economies.

Call for Urgent Reforms

The World Bank stressed that countries will need to invest in infrastructure, improve workforce skills, strengthen business environments and encourage greater private-sector participation to fully benefit from emerging opportunities.

The report called for urgent policy measures to restore growth, improve fiscal sustainability and create employment, warning that without reforms many developing economies could continue to fall behind their richer counterparts.

“The first half of the 2020s are now behind us, and it is possible that this decade might already be lost. But the 2030s are not,” Gill said.

The World Bank’s warning underscores the challenges facing developing nations as they seek to recover from years of economic shocks while preparing for a rapidly changing global economy.