By Sallieu S. Kanu
WASHINGTON—The global economy is expected to experience its weakest growth in nearly two decades outside of formal recessions, as heightened trade tensions and policy uncertainty continue to weigh on economic activity. This projection, outlined in the World Bank’s latest Global Economic Prospects report, has resulted in growth forecast reductions for nearly 70% of all economies worldwide.
According to the report, global growth in 2025 is now projected at 2.3%, nearly half a percentage point lower than earlier forecasts. While a global recession is not anticipated, growth levels for the first seven years of the 2020s could be the slowest of any decade since the 1960s if current projections hold.
World Bank Group Chief Economist Indermit Gill noted that growth in developing economies has steadily declined—from 6% annually in the 2000s to less than 4% in the 2020s—a trend that closely mirrors the slowdown in global trade and investment.
Growth is expected to decline in nearly 60% of developing economies this year, with an average of 3.8% forecasted for 2025, slightly improving to 3.9% in 2026 and 2027. Low-income countries are projected to grow by 5.3% in 2025, a 0.4 percentage point downgrade from earlier estimates.
Additionally, tariff increases and tight labor markets are pushing global inflation higher, with 2025 inflation expected to average 2.9%, still above pre-pandemic levels.
The report warns that slower economic growth will hamper job creation efforts, delay poverty reduction initiatives, and widen income disparities between emerging markets and advanced economies.
If developing economies—excluding China—maintain a 4% GDP growth rate through 2027, it could take nearly two decades for them to recover to their pre-pandemic economic trajectory.
Policy Recommendations
The World Bank suggests that global growth could recover faster than anticipated if major economies resolve trade disputes and reduce policy uncertainty. The report states that halving tariffs from late May levels could boost global growth by 0.2 percentage points on average over 2025 and 2026.
M. Ayhan Kose, the World Bank’s Deputy Chief Economist, emphasized the importance of trade integration, structural reforms, and fiscal resilience to help economies navigate the current slowdown.
The report also calls on developing economies to pursue new trade partnerships, strengthen their domestic revenue mobilization efforts, and prioritize spending for vulnerable populations.
To accelerate economic growth, policymakers are encouraged to enhance business climates, equip workers with relevant skills, and facilitate efficient labor market matching. Multilateral cooperation, concessional financing, and emergency relief programs for conflict-affected countries will also be key to supporting fragile economies.
With trade barriers rising and financial uncertainty looming, renewed global dialogue and coordinated economic strategies could pave the way for a more stable global outlook, the report concludes.