The Great Divergence Reversed: How the Pandemic Era Widened the Income Gap Between Rich and Poor Nations

For half a century the world experienced a remarkable economic convergence: developing countries grew faster than advanced ones, hundreds of millions escaped extreme poverty, and the income gap between rich and poor nations narrowed steadily. The engine of this convergence was overwhelmingly China, whose rise from subsistence agriculture to the world's second-largest economy lifted global averages and created demand that pulled commodity exporters and manufacturing hubs upward with it. By 2019 that convergence appeared irreversible — a permanent feature of the global economic landscape.

The pandemic broke it. According to World Bank data cited in a comprehensive year-end analysis published by BFM.ru on 31 December 2024, one in four developing countries will end 2024 poorer in per-capita terms than on the eve of the pandemic in 2019. In fragile and conflict-affected states, that proportion doubles. The income gap between developing and advanced economies widened in nearly half of all developing countries during 2020-2024 — the highest share since the 1990s, when the post-Soviet transition and the Asian financial crisis produced a similar divergence.

The numbers behind the reversal

The World Bank's Global Economic Prospects report, published in mid-2024, laid out the arithmetic of stagnation. Global growth was projected at 2.6% for 2024, stabilising for the first time in three years but at a level well below the 3.1% average of the 2010-2019 decade. Countries accounting for more than 80% of the world's population and GDP would continue to grow slower than they did in the ten years before COVID-19. The projections for 2025 and 2026 — an average of 2.7% — offered no prospect of catching up.

• Developing economies: average annual growth of approximately 4% in 2024-2025, slightly below 2023
• Advanced economies: 1.5% growth in 2024, with Germany hovering near zero
• Low-income countries: growth accelerating to 5% in 2024, up from 3.8% in 2023
• Per-capita income growth in lagging countries: projected at just 3% through 2026, against 3.8% in the pre-pandemic decade
• One in four developing countries: still poorer in 2024 than in 2019
• Fragile and conflict-affected states: one in two still poorer
• Income gap widened in: nearly half of all developing countries during 2020-2024
• Highest share of divergence since: the 1990s

Why convergence stalled

The reversal was not caused by a single shock but by the interaction of several forces that reinforced each other. The pandemic itself delivered an asymmetric blow: advanced economies deployed fiscal stimulus averaging 10-15% of GDP and had access to vaccines within months, while most developing countries lacked fiscal space, faced vaccine delays, and depended on tourism, remittances and commodity exports that collapsed simultaneously.

The global inflation surge of 2022-2023 then forced central banks in advanced economies — the Federal Reserve, the European Central Bank, the Bank of England — to raise rates aggressively. Higher rates in the reserve-currency countries triggered capital outflows from developing markets, raised their borrowing costs, and depressed their exchange rates. Countries that had borrowed heavily in dollars during the cheap-money era of 2010-2021 found their debt service obligations ballooning precisely when their revenues were under pressure. The World Bank estimated that debt service costs across developing countries rose by approximately 40% between 2021 and 2024.

Trade fragmentation added a third layer of damage. The era of hyper-globalisation that had powered convergence was giving way to friend-shoring, near-shoring and strategic industrial policy. Supply chains that had been optimised for cost were being restructured for resilience and geopolitical alignment, and the restructuring favoured countries with large domestic markets, advanced infrastructure and political alignment with the United States or the European Union. Poor countries that had hoped to industrialise by plugging into global value chains found those chains being shortened and politicised.

Finally, China's own growth model changed. The engine of convergence was itself slowing: Chinese GDP growth fell from 6.7% in 2016 to approximately 4.8% in 2024, and the composition of growth shifted from infrastructure and manufacturing investment toward services and domestic consumption. China's demand for commodities — the mechanism through which its growth had been transmitted to Africa, Latin America and Central Asia — weakened as its property sector entered crisis and its infrastructure build-out matured. For commodity-dependent developing countries, the Chinese slowdown was a terms-of-trade shock that no amount of domestic reform could offset.

The India question

If China can no longer serve as the engine of global convergence, the obvious candidate to replace it is India. With 1.4 billion people, a median age of 28, and GDP growth consistently above 6%, India has the demographic scale and dynamism that China possessed in the 1990s and 2000s. The World Bank projected Indian growth of approximately 6.5-7% for 2024-2026, making it the fastest-growing major economy in the world.

But India's capacity to replicate China's convergence effect is limited by several structural differences. China's rise was export-led: it became the world's factory, absorbing manufacturing from every corner of the globe and creating supply chains that pulled dozens of countries into its orbit. India's growth is predominantly domestic and services-led — information technology, business process outsourcing, pharmaceuticals — sectors that employ relatively few people and generate fewer cross-border linkages than mass manufacturing. India's infrastructure deficit, labour market rigidity, and protectionist trade policy further limit its ability to serve as a demand sink for other developing countries' exports.

The result is that India's growth, however impressive in aggregate, does not generate the same convergence dividend that China's did. A Chinese growth rate of 8% in 2005 pulled hundreds of millions of people in other countries out of poverty through demand for raw materials, components and finished goods. An Indian growth rate of 7% in 2024 does not, because the transmission mechanisms — trade in goods, foreign direct investment in manufacturing, infrastructure lending — are far weaker.

What the data says about 2024 specifically

The year 2024 itself was a mixed picture. Global trade reached a record $33 trillion according to UNCTAD, suggesting that the fragmentation thesis was overstated — commerce continued to expand even as its composition and direction shifted. Global inflation was easing, with the World Bank projecting a fall to 3.5% in 2024 and 2.9% in 2025, which reduced the pressure on developing-country central banks and created space for growth-supportive policy. The two largest economies performed adequately: the United States grew approximately 2.0% according to Federal Reserve projections, and China approximately 4.8% according to the World Bank.

But beneath these aggregates, the divergence persisted. Germany — Europe's largest economy — hovered near zero growth for a second consecutive year. Russia's economy grew at approximately 3.5-4% according to Bank of Russia and Economy Ministry estimates, but at the cost of record inflation near 10%, a key rate of 21%, and an economic structure increasingly dominated by defence spending. The growth that did occur in the developing world was concentrated in a handful of large Asian economies — India, Indonesia, the Philippines, Vietnam — while much of Africa, Latin America and Central Asia stagnated or regressed.

Implications and the road ahead

The reversal of convergence has profound implications beyond economics. The political stability of developing countries depends on delivering rising living standards to populations that are young, urbanising and connected to global media. A decade of stagnation — of per-capita incomes failing to recover to 2019 levels — creates conditions for political instability, mass migration, and the appeal of authoritarian alternatives to democratic governance. The World Bank's finding that fragile and conflict-affected states were twice as likely to remain below 2019 income levels is not merely an economic statistic; it is a security warning.

The policy response requires action on multiple fronts simultaneously. Debt relief for the poorest countries — through the G20 Common Framework or bilateral restructuring — is necessary to free fiscal space for investment. Trade policy must resist the temptation to fragment further, and the World Trade Organization's dispute settlement mechanism must be restored. Advanced-country central banks must consider spillover effects when setting rates, and multilateral development banks must scale up concessional lending. None of these is politically easy, and the 2024 record suggests that none is happening at the required speed.

The honest conclusion from the 2024 data is that the era of automatic convergence — in which developing countries grew faster than advanced ones simply by adopting existing technologies and plugging into global supply chains — has ended. What replaces it will depend on choices: by developing-country governments on reform and investment, by advanced-country governments on trade and aid, and by international institutions on adaptation to a more fragmented and contested world. The quarter of developing countries that remain poorer than in 2019 are not victims of fate. They are casualties of policy failures — their own and those of the international community — that remain, as of the end of 2024, largely unaddressed.

The debt trap dimension

Beneath the income statistics lies a debt crisis that constrains recovery across the developing world. Between 2020 and 2024, developing-country external debt service payments rose by approximately 40% as global interest rates normalised from their pandemic-era lows. For the poorest countries — those eligible for the International Development Association — debt service consumed an average of 15% of government revenue by 2024, up from approximately 8% in 2019. Every dollar spent on interest is a dollar not spent on health, education, infrastructure or social protection, creating a vicious cycle in which stagnation generates fiscal pressure that further entrenches stagnation.

The G20 Common Framework, established in 2020 to coordinate debt restructuring, has delivered completed treatments for fewer than ten countries in four years. Bilateral creditors — particularly China, which became the largest official creditor to developing countries during the Belt and Road era — have been reluctant to accept haircuts, and private creditors have held out for full repayment. The result is a zombie debt architecture in which countries that are effectively insolvent continue to service debts at the expense of their populations, while the international system lacks the mechanisms to force resolution. Without a credible debt resolution mechanism, the quarter of developing countries that remain below 2019 income levels have no realistic path to recovery through their own fiscal resources.

Climate change as a convergence killer

A fourth structural force working against convergence has become impossible to ignore: climate change. The countries most vulnerable to rising temperatures, extreme weather, sea-level rise and agricultural disruption are overwhelmingly those with the lowest per-capita incomes and the least capacity to adapt. The World Bank estimates that climate change could push an additional 130 million people into extreme poverty by 2030, concentrated in Sub-Saharan Africa and South Asia — precisely the regions where convergence had already stalled.

The injustice is compound: developing countries contributed least to the emissions causing climate change but bear its costs most acutely, while simultaneously facing pressure to forgo the fossil-fuel-intensive development path that advanced countries themselves followed. The promise of 00 billion in annual climate finance from advanced to developing countries — first made in 2009 — has been delivered late, partially, and in forms (loans rather than grants) that add to the debt burden rather than relieving it. For the poorest countries, climate adaptation is not a separate policy domain but a precondition for any growth strategy, and the resources to fund it simply do not exist at the required scale.

The role of global public goods

The pandemic exposed how fragile the global public goods architecture had become. Vaccine distribution was governed by bilateral contracts and nationalism rather than multilateral coordination; COVAX delivered doses to low-income countries months after advanced economies had vaccinated their populations. The World Health Organization lacked both funding and authority to enforce equitable access. Similar failures characterised the response to debt distress, climate finance and trade facilitation.

For convergence to resume, the international system needs functioning mechanisms for providing global public goods: pandemic preparedness, climate adaptation finance, debt resolution, trade facilitation for low-income exporters, and technology transfer. None of these exists at adequate scale today. The multilateral institutions designed to provide them — the World Bank, the IMF, the WHO, the WTO — are underfunded, under-reformed and politically constrained. The 2024 data on income divergence is therefore not merely an economic finding; it is an indictment of international cooperation that shows the system failing precisely the countries that depend on it most.