Sacrificing sustainability for a higher GDP growth rate

Abstract

Striving for positive GDP growth often comes at the expense of sustainability indicators, highlighting a crucial dilemma in modern economic development. This empirical study delves into the intricate relationship between sovereign sustainability indicators and GDP growth by using panel data that spans across 15 years for 100 countries and sheds light on the complexities of economic progress in the context of sustainability. Analysis reveals a negative bidirectional relationship between SDG scores and GDP growth rate, prompting further exploration into the determinants of these variables. Notably, GDP growth tends to rise following deteriorations in sustainability, while improvements in certain sustainability indicators, such as quality education and renewable energy consumption, correspond to enhanced GDP growth. However, the interplay between GDP growth factors and SDG scores unveils nuanced patterns, with both positive and negative associations observed across various determinants. These findings underscore the multifaceted nature of the relationship between sustainability and economic growth, challenging the notion that GDP growth alone signifies economic well-being. Considering these insights, policymakers are urged to adopt a holistic approach to sustainable development, integrating diverse econometric metrics, decoupling economic growth from environmental degradation, and bolstering data collection and analysis efforts. By embracing comprehensive strategies that prioritize sustainability alongside economic prosperity, policymakers can pave the way for inclusive and resilient development pathways.