The World Bank has lowered its global growth forecast for 2025 to 2.3 per cent, warning that mounting trade tensions and persistent policy uncertainty are dampening prospects for economic recovery. This revised projection, released on Tuesday through the Bank’s Online Media Briefing Centre, represents a significant downgrade—nearly half a percentage point below the figure projected at the start of the year.
The gloomy outlook signals what may become the slowest decade for global growth since the 1960s, particularly if current trends hold. According to the latest Global Economic Prospects report, the world economy is on track to experience its weakest non-recessionary expansion since the global financial crisis of 2008.
“The turmoil has resulted in growth forecasts being cut in nearly 70 per cent of all economies, across all regions and income groups,” the report stated, underscoring the widespread nature of the slowdown.
While a global recession is not currently expected, the World Bank is sounding the alarm on stagnation, especially in the developing world. Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice-President for Development Economics, cautioned that growth in these regions is increasingly elusive.
“Outside of Asia, the developing world is becoming a development-free zone. It has been advertising itself for more than a decade,” Mr Gill said.
The data paints a stark picture: the average growth rate in developing economies has dropped from 6 per cent in the 2000s to 5 per cent in the 2010s, and now hovers below 4 per cent in the current decade. This deceleration coincides with a broader slump in global trade, which has fallen from a 5 per cent average growth rate in the 2000s to under 3 per cent today.
Investment growth has also lost momentum, while public and private debt levels have surged to historic highs.
For 2025, growth is projected to decline in nearly 60 per cent of developing countries, averaging 3.8 per cent—more than a full percentage point below the average recorded in the 2010s. Modest improvements are expected in subsequent years, with projections of 3.9 per cent in both 2026 and 2027.
Growth among low-income countries is forecast at 5.3 per cent in 2025, reflecting a 0.4 percentage point downgrade from earlier estimates. Meanwhile, global inflation is expected to remain sticky due to tariff hikes and tight labour markets, with an average of 2.9 per cent in 2025—still above pre-pandemic levels.
The World Bank stressed that the slowdown would have serious implications for poverty reduction and income convergence. “Per capita income growth in these economies is forecast at 2.9 per cent in 2025, 1.1 percentage points below the 2000–2019 average,” the report noted.
It warned that if developing countries—excluding China—maintain a GDP growth rate of 4 per cent through to 2027, it could take two decades for them to return to their pre-COVID growth trajectory.
However, the Bank highlighted that a more optimistic outcome remains possible. Resolving trade disputes and halving tariffs could lift global growth by 0.2 percentage points in 2025 and 2026.
In the face of rising protectionism, the report urged developing nations to diversify trade, form strategic partnerships, and deepen regional integration. It also advised policymakers to focus on strengthening domestic revenue mobilisation, protecting vulnerable populations, and improving public financial management.
To stimulate inclusive and sustainable growth, the World Bank recommended reforms aimed at enhancing the business environment, expanding productive employment, and better aligning workforce skills with market demands.
The report concluded with a call for greater international cooperation, especially in supporting fragile and conflict-affected countries through concessional financing, multilateral support, and targeted relief efforts.
