Heightened trade tensions and policy uncertainty are projected to slow global growth to its lowest pace since 2008, excluding outright recessions, according to the World Bank's Global Economic Prospects report. Growth forecasts have been reduced for nearly 70% of economies worldwide.
The World Bank anticipates global growth will decelerate to 2.3% in 2025, a decline of nearly half a percentage point from earlier expectations this year. Although a global recession is not predicted, if current forecasts hold, average global growth for the first seven years of the 2020s will be the slowest since the 1960s.
"Outside of Asia, the developing world is becoming a development-free zone," said Indermit Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank Group. He noted that growth in developing economies has declined over three decades from an annual rate of 6% in the 2000s to less than 4% in the current decade.
In developing economies, growth is expected to decrease in nearly 60% of these regions this year, averaging 3.8% in 2025 and slightly increasing to an average of 3.9% between 2026 and 2027. This represents more than a percentage point drop compared to averages from the previous decade. Low-income countries are forecasted to grow by 5.3%, down by 0.4 percentage points from earlier projections for this year.
Slower growth could hinder efforts in developing economies aimed at job creation, poverty reduction, and narrowing income gaps with advanced nations. Per capita income growth is projected at 2.9% for these regions in 2025—1.1 percentage points below pre-2020 averages.
Global economic recovery might accelerate if major economies can alleviate trade tensions, potentially reducing policy uncertainty and financial volatility. "Emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict," stated M. Ayhan Kose, Deputy Chief Economist and Director of the Prospects Group at the World Bank.
The report suggests that facing rising trade barriers, developing economies should pursue strategic partnerships and diversify their trade options through regional agreements. Policymakers are advised to focus on mobilizing domestic revenues and prioritizing fiscal spending for vulnerable populations while strengthening fiscal frameworks.
Improving business environments and promoting productive employment through skill development will be essential for accelerating economic growth globally. Collaboration among nations will play a critical role in supporting vulnerable developing economies through multilateral interventions and emergency relief where necessary.
For detailed regional outlooks or further information about these findings, interested parties can access additional resources provided by the World Bank online.