World Bank Report: Global Growth to Slow Down to Its Lowest Pace Since 2008
According to the latest report published by the World Bank, intensifying trade tensions and uncertainty surrounding public policies are expected to slow down global growth this year since 2008 (excluding recessions). Recent turbulence has led to a downward revision of growth forecasts for nearly 70% of the world's economies, across all regions and income categories.**
The Global Economic Prospects forecast growth to slow down to 2.3% in 2025, a performance inferior by nearly half a percentage point to what was projected at the beginning of the year. They do not anticipate a global recession. However, if the forecasts for the next two years materialize, the average global growth during the first seven years of the 2020s will be the slowest of all decades since the 1960s.
"Outside of Asia, the developing world is increasingly entering an era of stagnation," warns Indermit Gill, Chief Economist and Senior Vice-President of the World Bank's Development Economics Group. "This threat has been looming for over a decade now. Growth in developing economies has gradually slowed down over the past thirty years, from 6% per annum in the 2000s, to 5% in the 2010s, and then to less than 4% in the 2020s. This evolution follows the trajectory of global trade growth, which has decreased from an average of 5% in the 2000s to around 4.5% in the 2010s, and then dropped to less than 3% in the 2020s. Investment growth has also slowed down, while debt has reached record levels."
Growth is expected to slow down in nearly 60% of developing economies this year, averaging 3.8% in 2025 before slightly increasing to 3.9% on average in 2026 and 2027. Rates lower by more than one percentage point compared to the average recorded in the 2010s. Low-income countries are expected to post a growth rate of 5.3% this year, 0.4 percentage points lower than the rate projected at the beginning of 2025. The rise in tariffs and the tightening of labor markets are also generating inflationary pressures: global inflation is expected to stand at 2.9% in 2025, a rate that remains higher than pre-pandemic levels.
The slowdown in growth will hinder the ability of developing countries to stimulate job growth, reduce extreme poverty, and bridge the gap that separates them from the income levels per capita of advanced economies. The growth of income per capita in developing economies is expected to stand at 2.9% in 2025, 1.1 percentage points lower than the average recorded between 2000 and 2019. Assuming developing economies (excluding China) are able to maintain a GDP growth rate of 4% (which is in line with projections for 2027), it would take them approximately two decades to recover their pre-pandemic trajectory.
Global growth could rebound faster than expected if major economies manage to alleviate trade tensions, reducing overall political uncertainty and financial instability. The report states that if current trade disputes were resolved through agreements that reduce tariffs by half compared to the end of May, global growth would gain an additional 0.2 percentage points on average between 2025-2026.
"Emerging and developing economies have reaped the benefits of trade integration in the past, but they are now at the forefront of a global trade war," notes Ayhan Kose, Deputy Chief Economist and Director of the World Bank's Prospects Group.
The best defense is to redouble integration with new partners, advance growth-supporting reforms, and enhance budget resilience to weather the storm. In the face of rising trade barriers and uncertainty, a resumption of dialogue and global cooperation can pave the way for a more stable and prosperous future."
As they face a multiplication of obstacles to trade, developing economies should prioritize greater liberalization by forging strategic commercial and investment partnerships with other economies and diversifying their trade, particularly within the framework of regional agreements. Given limited public resources and growing development needs, policymakers should strive to mobilize domestic revenue, prioritize spending on the most vulnerable, and strengthen budget frameworks.
Finally, to accelerate economic growth, countries must improve the business climate, promote productive employment by equipping workers with the necessary skills, and creating conditions for an effective match between workers and enterprises in the labor market. Global collaboration will be vital to support the most vulnerable developing economies, particularly through multilateral interventions, concessional financing, and, for countries in conflict, emergency aid and support.
