The World Bank has revised its 2025 global economic growth projection downward to 2.3%, citing escalating trade tensions and lingering policy uncertainty as key factors behind the slowdown. The figure, revealed in the Bank’s latest Global Economic Prospects report released recently, marks a nearly half-percentage-point cut from earlier forecasts.
According to the Bank, this would represent the slowest pace of non-recessionary global growth since the financial crisis of 2008.
The report highlighted that around 70% of the world’s economies—across all regions and income levels—have seen their growth projections downgraded. Despite the broad-based deceleration, the Bank does not anticipate a global recession. Still, if current trends continue, the average annual global growth rate for the 2020s would become the weakest since the 1960s.
Indermit Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank, voiced concerns about stagnation in developing countries outside Asia.
“Much of the developing world has been in a state of prolonged stagnation. These regions have promoted their development potential for over a decade without delivering the required growth,” Gill said.
Growth in developing countries has slowed from 6% annually in the 2000s to 5% in the 2010s, and now to under 4% in the 2020s. This mirrors a broader contraction in global trade—from 5% average growth in the 2000s to below 3% today. Investment growth has weakened, while public and private debt have ballooned to unprecedented levels.
For 2025, nearly 60% of developing nations are expected to see growth decline, averaging 3.8%. A modest rebound to 3.9% is anticipated in 2026 and 2027—still more than one percentage point below the 2010s average.
Low-income countries are forecast to grow by 5.3% in 2025, reflecting a 0.4 percentage point downgrade from previous estimates. Meanwhile, global inflation is expected to average 2.9%—elevated compared to pre-pandemic norms—due to factors like rising tariffs and tight labor markets.
The World Bank warned that this sluggish growth poses a significant threat to global development, especially in terms of job creation, poverty reduction, and income convergence with developed economies.
Per capita income growth in developing countries is expected to reach only 2.9% in 2025, significantly lower than the 2000–2019 average of 4%. If countries excluding China maintain a GDP growth rate of 4%, they may need up to 20 years to return to their pre-COVID growth trajectory.
However, the Bank noted that global growth could recover more quickly if geopolitical tensions eased. A reduction in tariffs and improved international cooperation could lift global GDP growth by 0.2 percentage points in 2025 and 2026.
In response to growing protectionism, the Bank recommended that developing economies diversify exports, pursue regional trade agreements, and forge strategic economic alliances. Given strained budgets, policymakers were urged to mobilise domestic resources, prioritize aid for vulnerable populations, and improve fiscal discipline.
To support long-term recovery, the report emphasised the importance of enhancing business environments, fostering productive employment, and aligning education and workforce skills with market demands. Finally, the Bank called for coordinated global action to help the most vulnerable countries through concessional financing, development aid, and targeted conflict-related relief.