Global economic growth is expected to slow to 2.3 per cent in 2025, driven by rising trade tensions and ongoing policy instability, according to the World Bank’s latest Global Economic Prospects report.
In a briefing issued on Tuesday through the bank’s Online Media Briefing Centre, officials confirmed that the revised outlook marks a drop of nearly half a percentage point from forecasts made earlier this year.
The report noted that the anticipated slowdown would represent the weakest global growth outside of recessionary periods since the 2008 financial crisis.
“Widespread disruption has led to growth downgrades in nearly 70 per cent of economies, cutting across regions and income levels,” the report said.
Although the projections do not point to an impending global recession, they suggest that, if the trends hold, average worldwide growth during the first seven years of this decade will be the slowest since the 1960s.
Indermit Gill, Chief Economist and Senior Vice-President for Development Economics at the World Bank Group, issued a stark warning about the pace of progress in developing economies.
“Outside of Asia, the developing world is becoming a development-free zone. It has been promising growth for over a decade,” he said.
Gill pointed out that economic expansion in developing nations has declined consistently, falling from an annual average of 6 per cent in the 2000s to 5 per cent in the 2010s, and now dipping below 4 per cent in the 2020s.
This decline mirrors the drop in global trade, which has slipped from an average growth rate of 5 per cent in the 2000s to under 3 per cent currently. Investment growth has also slowed, while global debt has soared to unprecedented levels.
Looking ahead, the report projected that 2025 would see growth slow in nearly 60 per cent of developing economies, averaging 3.8 per cent before a slight increase to 3.9 per cent in both 2026 and 2027. This remains more than a full percentage point lower than the average for the 2010s.
For low-income countries, growth is expected to reach 5.3 per cent in 2025, marking a 0.4 percentage point cut from earlier predictions.
“Rising tariffs and tight labour markets are likely to keep global inflation above historical norms,” the report stated, forecasting an inflation rate of 2.9 per cent in 2025. This would remain above pre-pandemic levels.
The World Bank cautioned that the persistent slowdown would undermine developing countries’ efforts to generate employment, alleviate poverty, and narrow the income gap with more advanced economies.
Per capita income growth in these countries is now forecast at 2.9 per cent for 2025, which is 1.1 percentage points below the average recorded between 2000 and 2019.
Assuming developing economies, excluding China, continue to grow at a rate of 4 per cent—the current projection for 2027—it could take roughly twenty years for them to return to the growth path that was expected before the COVID-19 pandemic.
Despite the challenges, the report noted that global growth could recover more quickly if key economic powers moved to ease trade tensions.
It suggested that resolving trade disputes and reducing tariffs by half could lift global growth by 0.2 percentage points over 2025 and 2026.
In the face of mounting protectionism, the World Bank urged developing nations to diversify their trade relationships, forge strategic economic partnerships, and strengthen participation in regional trade agreements.
With public resources increasingly limited and development needs rising, policymakers are being advised to strengthen domestic revenue collection, target spending to protect vulnerable populations, and improve fiscal governance.
The report also called for urgent reforms aimed at fostering sustainable growth. These include streamlining regulatory environments, boosting employment in productive sectors, and tailoring workforce skills to match market demands.
In conclusion, the report called for enhanced global cooperation, stressing the need for multilateral support mechanisms, concessional financing, and targeted aid for countries grappling with conflict and instability.
