JACKSON HOLE, Wyoming- The global economy's post-pandemic prospects appear worrisome, as they grapple with soaring government debt, escalating geopolitical tensions threatening to fracture the global trading system, and the likelihood of prolonged sluggish productivity growth.

These challenges could hinder the development of certain countries right from the outset. This unsettling perspective on the world's economic future emerged from a study conducted by the Kansas City Federal Reserve. The research delved into topics such as the prospects for technological advancements, mounting public debt, and the state of international trade.

It comes at a time when events like the Russian invasion of Ukraine and increasing tensions between the U.S. and China have undermined the once-broad global consensus, at least in principle, to promote the free exchange of goods and services.

Countries find themselves in a more delicate situation now, having expended significant fiscal resources to combat the pandemic. International Monetary Fund chief economist Pierre-Olivier Gourinchas, speaking at an annual Fed conference, emphasized the challenges. He pointed to policy-driven factors such as geoeconomic fragmentation, trade tensions, and the growing disconnect between the Western world and China.

Gourinchas expressed concerns that if a portion of the globe lags behind in development with substantial populations, this could lead to significant demographic and migration pressures.

Gourinchas suggested the possibility of global growth settling at a modest rate of around 3% annually. This contrasts with the past, when rapid economic growth in China propelled global output above 4%. Some economists consider this lower growth rate almost recessionary, given the potential for substantial progress in larger, less-developed countries.

Maurice Obstfeld, a former IMF chief economist and current fellow at the Peterson Institute for International Economics, noted that in this evolving post-pandemic economy, the global growth landscape has become exceedingly challenging.

China is currently facing persistent economic challenges, possibly of a chronic nature, compounded by a declining population. Meanwhile, emerging industrial strategies in the United States and other countries are reshaping global production networks. These changes might offer increased durability and enhanced national security, but they could also come at the cost of reduced efficiency.

The symposium represents one of the initial significant efforts to assess the enduring economic shifts following the pandemic. This evaluation occurs amidst renewed geopolitical tensions, following years during which policymakers initially grappled with combating COVID-19 and then had to contend with a worldwide surge in inflation.

Economists and policymakers at the symposium largely concurred that the pandemic and recent events have amplified two pre-existing trends with significant implications for global growth.

One of these trends, the rising ratio of public debt to global economic output, which initially surged during the Global Financial Crisis 15 years ago, has now increased from 40% to 60% due to pandemic-related spending. According to a paper by Serkan Arslanalp from the International Monetary Fund and Barry Eichengreen, an economics professor at the University of California, Berkeley, this ratio may have reached a point where substantial debt reduction is no longer politically feasible.

The repercussions of this "persistent" public debt situation will vary by country, as Arslanalp and Eichengreen noted. Higher-debt but higher-income nations like the U.S. may be able to navigate through this situation over time, while smaller nations could potentially face debt crises or fiscal constraints.

Additionally, on a global scale, there could be significant consequences if increased public borrowing diverts capital away from countries still experiencing population growth and possessing less developed economies, cautioned Eswar Prasad, an economics professor at Cornell University.

This scenario places us in a rather grim situation, especially when considering regions abundant in labor but lacking in capital resources," noted Eswar Prasad. While major European nations, Japan, China, and the U.S. grapple with aging populations, some African nations like Nigeria continue to experience rapid growth.

The other enduring pre-pandemic trend centers on an increasing inclination towards a range of policies, from the protectionist tariffs initiated by former U.S. President Donald Trump to the Biden administration's efforts to reshore the production of items like computer chips.

Jared Bernstein, Chair of the White House Council of Economic Advisers, clarified that the Biden administration's industrial policies neither explicitly favor nor oppose international trade, especially considering the importation of intermediate goods needed for products like silicon chips.

However, the Russian invasion of Ukraine and the subsequent disconnection of the European power grid from Russian energy sources fractured one of globalization's fundamental principles: that trade fosters lasting partnerships, if not outright alliances.

Ben Broadbent, Deputy Governor of the Bank of England, reminisced about a time when more trade was seen as a means to create friendships but acknowledged that this notion might have been more idealistic.

Ngozi Okonjo-Iweala, Director-General of the World Trade Organization, recognized the concerns about global supply resilience brought forth by the pandemic. However, she cautioned that reshaping global production patterns could overlook growth opportunities. She suggested that diversification efforts should extend to those who have been on the fringes of the global system, emphasizing that alliances can change.

Amidst these discussions, there was a glimmer of optimism around advancements in artificial intelligence as a potential driver of increased productivity. Yet, this was countered by concerns about the potential negative impacts of these technologies and research indicating that innovation is becoming exponentially more challenging.

Furthermore, the benefits of AI and technological progress may not materialize quickly. Nela Richardson, Chief Economist for payroll processor ADP, compared AI to a Peloton exercise bike, highlighting that simply having the technology doesn't guarantee its widespread use.