The World Bank has revised its global GDP growth forecast for 2025 downward to 2.3%, marking the slowest pace since the 2008 financial crisis outside of an official recession. This update, published in its June Global Economic Prospects report, reflects a nearly half-point decline from the earlier estimate of 2.7% issued in January. The downward revision underscores mounting economic challenges fueled by rising geopolitical tensions, intensifying trade barriers, and weakening demand in major economies such as China.
According to the report, over 70% of countries across all income levels have experienced cuts to their growth outlooks. Much of this slowdown stems from ongoing fragmentation in global trade systems and widespread policy uncertainty, particularly around protectionist measures. The World Bank notes that these factors have discouraged investment, hampered the flow of goods, and eroded both business and consumer confidence worldwide. The effective tariff rate in the U.S., for example, has now reached levels not seen since the early 20th century, weighing heavily on global commerce.
Global trade growth is expected to slow sharply to just 1.8% in 2025, a significant deceleration from the 3.4% recorded in 2024. This pace is also well below the 5% average annual growth rate seen during the early 2000s. The stalling of trade activity is particularly harmful to emerging and developing economies, many of which are heavily reliant on exports for economic growth.
Growth in emerging markets and developing economies (EMDEs) is forecast to drop to 3.8% in 2025—down from historical averages of more than 4.8% before the COVID-19 pandemic. Among the world’s poorest nations, the growth outlook stands at 5.3%, a 0.4 percentage point downgrade from previous forecasts. These rates are insufficient to accelerate progress on poverty reduction or to restore pre-pandemic development trajectories.
Advanced economies are facing similar headwinds. The United States is now projected to grow just 1.4% in 2025, compared to a January forecast of 2.3%. The Euro Area and Japan are also expected to see slower economic expansion amid tightening financial conditions and persistent inflation. Despite these warnings, the World Bank does not expect a global recession this year, estimating the likelihood at under 10%.
World Bank Chief Economist Indermit Gill highlighted the troubling slowdown in long-term development trends. He warned that outside of Asia, the developing world is becoming a “development-free zone,” with growth levels consistently falling below past averages. For EMDEs, per-capita income growth is projected to reach just 2.9% in 2025—1.1 percentage points lower than the average for the two decades before the pandemic. Without significant policy shifts, many countries may not return to their pre-pandemic economic paths for another 20 years.
Inflation remains another persistent challenge. Global inflation is expected to hover around 2.9% in 2025, still elevated compared to pre-pandemic norms. Tariffs, labor shortages, and supply chain disruptions continue to exert upward pressure on prices, complicating efforts by central banks to maintain financial stability. For commodity-exporting nations, declining prices for oil and metals are further straining fiscal budgets and dampening growth prospects.
The World Bank’s report offers a series of recommendations to mitigate downside risks and rejuvenate economic momentum. Chief among them is a call for countries to reduce global tariffs—reversing recent protectionist trends. The Bank estimates that returning tariffs to mid-2024 levels could raise global growth by 0.2 percentage points over the next two years. For developing economies, additional reforms are advised, including widening trade partnerships, strengthening domestic revenue collection, investing in public services for vulnerable populations, and restoring macroeconomic discipline.
Despite the bleak short-term picture, the World Bank expects some modest recovery beyond 2025, with global growth projected to reach 2.5% in both 2026 and 2027. However, this pace would still render the 2020s the weakest decade for global economic performance since the 1960s unless trade integration and policy cooperation are revived.
In summary, the World Bank’s revised forecast reflects a convergence of risks—geopolitical uncertainty, declining trade, inflation pressures, and sluggish demand—that are dampening the world economy. Without decisive action from policymakers, particularly in promoting trade openness and structural reform, the outlook remains clouded.
