The global economy is on track to record its weakest growth since the 2008 financial crisis, excluding years marked by outright recessions, according to the latest Global Economic Prospects report released by the World Bank on Tuesday.
The report cited escalating trade tensions and persistent policy uncertainty as key factors behind the downturn, with growth forecasts downgraded in nearly 70 per cent of economies across all regions and income groups.
Global economic growth is now projected to slow to 2.3 per cent in 2025, nearly half a percentage point lower than earlier projections made at the start of the year. Though a full-scale global recession is not anticipated, the World Bank cautioned that if current trends continue, the average global growth for the first seven years of the 2020s would be the slowest of any decade since the 1960s.
“Outside of Asia, the developing world is becoming a development-free zone,” remarked Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics.
He explained that growth in developing economies has steadily declined over the past three decades — from 6 per cent annually in the 2000s to 5 per cent in the 2010s, and now to less than 4 per cent in the 2020s.
This trend mirrors the slowdown in global trade growth, which has fallen from an average of 5 per cent in the 2000s to about 4.5 per cent in the 2010s, and to under 3 per cent so far this decade. While investment growth has similarly weakened, global debt has risen to unprecedented levels.
In 2025, growth is expected to slow in nearly 60 per cent of developing economies, averaging 3.8 per cent before edging up slightly to 3.9 per cent between 2026 and 2027 — over a percentage point below the 2010s average.
Low-income countries are forecast to grow by 5.3 per cent in 2025, marking a 0.4 percentage point drop from the forecast at the start of the year.
The report also highlighted how higher tariffs and tightening labour markets continue to fuel inflation globally. Inflation is projected to average 2.9 per cent in 2025 — still above levels seen before the COVID-19 pandemic. This combination of slower growth and stubborn inflation is expected to further complicate efforts by developing economies to reduce poverty, create jobs, and bridge the income gap with wealthier nations.
Per capita income growth in developing countries is forecast at 2.9 per cent in 2025, which is 1.1 percentage points lower than the 2000–2019 average. Without significant intervention, the World Bank warned it could take these economies, excluding China, nearly two decades to return to their pre-pandemic growth trajectory.
Despite the bleak outlook, the report noted that global growth could rebound more quickly if major economies manage to resolve trade disputes and ease policy uncertainties. For instance, halving current tariff rates relative to their May 2025 levels could boost global growth by 0.2 percentage points on average over 2025 and 2026.
Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group, commented:
“Emerging-market and developing economies reaped the benefits of trade integration, but now find themselves on the frontlines of a global trade conflict. The smartest response is to deepen integration with new partners, advance pro-growth reforms, and strengthen fiscal resilience.”
The report advised developing countries to diversify their trade and investment partnerships through regional agreements, pursue reforms that improve their business environments, and mobilise domestic resources to support vulnerable households.
To drive inclusive and sustainable growth, the World Bank also urged policymakers to prioritise investments in skills development and create conditions that allow labour markets to connect workers to productive employment opportunities.
