Developing economies, which contribute significantly to global growth, are anticipated to face a challenging economic environment over the next two years. According to the World Bank's Global Economic Prospects report, these economies are projected to end the first quarter of the 21st century with their weakest long-term growth outlook since 2000. Despite stabilization in the global economy, developing countries will struggle to close the income gap with advanced economies.
The report forecasts that the global economy will grow by 2.7% in both 2025 and 2026, matching the pace of 2024 as inflation and interest rates gradually decrease. Developing economies are expected to maintain a steady growth rate of about 4% during this period. However, this is seen as insufficient for reducing poverty and achieving broader development objectives.
Indermit Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank Group, commented on the challenges facing developing economies: “The next 25 years will be a tougher slog for developing economies than the last 25.” He highlighted issues such as high debt burdens and rising climate change costs as significant obstacles.
Despite their challenges, developing economies have grown in importance globally since they now account for about 45% of global GDP—up from 25% in 2000—and play a crucial role in international trade and capital flows. They have also become vital sources of remittances and development assistance within their group.
M. Ayhan Kose, Deputy Chief Economist at the World Bank, emphasized that “developing economies will need bold and far-reaching policies” to capitalize on opportunities for cross-border cooperation amid policy uncertainty and trade tensions.
While potential headwinds include high global policy uncertainty and rising trade tensions that could affect investor confidence and financing flows, there remains optimism if major economic powers like China or the United States perform better than expected.
The report suggests several strategies for developing nations to enhance their growth prospects despite existing challenges. These include addressing infrastructure needs, accelerating climate transition efforts, improving human capital, modernizing transportation infrastructure, standardizing customs processes, pursuing strategic partnerships with other growing markets, and implementing sound macroeconomic policies domestically.
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