Global economic growth is expected to slow to 2.3% in 2025, according to the World Bank’s latest Global Economic Prospects report, citing escalating trade tensions and continued policy uncertainty as major contributing factors.
In a statement from the Bank’s Online Media Briefing Centre on Tuesday, it was revealed that this new forecast is nearly half a percentage point lower than what was projected at the beginning of the year. If realized, it would mark the weakest non-recessionary global growth since 2008.
“Growth forecasts have been downgraded in nearly 70% of economies across all regions and income levels,” the report noted.
While a global recession is not anticipated, the outlook remains bleak. If current trends hold, average global growth for the first seven years of the 2020s would be the slowest of any decade since the 1960s.
Indermit Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank, expressed concern over stagnating development, particularly in lower-income countries.
“Outside of Asia, the developing world is becoming a development-free zone,” Gill warned, noting a steady decline in growth—from 6% annually in the 2000s, to 5% in the 2010s, and now below 4% in the 2020s.
The slowdown is also reflected in trade and investment trends. Global trade growth has declined from 5% in the 2000s to under 3% today, while investment growth remains weak and debt levels have surged to record highs.
For developing economies, growth is expected to slow in nearly 60% of countries in 2025, averaging 3.8%, before a modest uptick to 3.9% in 2026 and 2027—over one percentage point below the average for the 2010s.
Growth in low-income countries is projected at 5.3% in 2025, which is 0.4 percentage points lower than earlier estimates.
The report also warned that global inflation will remain elevated at an average of 2.9% in 2025, largely due to tariff increases and tight labor markets—still above pre-pandemic levels.
Slower growth, the Bank cautioned, will hinder efforts to reduce poverty, create jobs, and close income gaps between developing and advanced economies. Per capita income growth in developing countries is forecast at 2.9%, which is 1.1 percentage points below the 2000–2019 average.
At current growth rates (excluding China), it could take two decades for developing economies to return to their pre-pandemic trajectories.
However, the report also highlighted potential for recovery. If global trade tensions ease and tariffs are halved, global growth could increase by 0.2 percentage points in 2025 and 2026.
In response, the World Bank urged developing countries to diversify trade, build strategic partnerships, and participate in regional trade agreements. Policymakers were also advised to mobilize domestic revenue, prioritize spending for the most vulnerable, and improve fiscal discipline.
To drive long-term recovery, the Bank emphasized enhancing business environments, expanding productive employment, and aligning workforce skills with market needs.
The report concluded with a call for stronger international cooperation, including concessional financing, targeted support for conflict-affected countries, and multilateral action to protect the most vulnerable economies.