Prime Highlights
- World Bank reduced 2025 growth projections for almost 70% of all world economies as economic momentum slows down.
- Global growth in 2025 is projected to slow down to 2.3%, the weakest non-recessionary performance since 2008.
Key Facts
- International trade is projected to grow a mere 1.8% in 2025 from 3.4% in 2024.
- Among the largest economies such as the US, EU, China, and Japan are some of the countries whose estimates have been lowered.
Background
The most recent Global Economic Prospects report by the World Bank is forecasting a bleak economic slowdown from here through 2025. World growth is currently forecast at only 2.3%, reduced from a previous forecast of 2.7%. The update is coming when protectionism is more prevalent, geopolitical tensions are elevated, and investment is slowing—combined forces that have reduced world production. The bank highlighted that almost 70% of emerging and developed economies have seen their growth projection reduced.
Most significantly, the developed nations are experiencing huge disillusionment. The US, initially forecast to grow at 2.3%, now only anticipates 1.4% in 2025 expansion. The Eurozone and Japan will, likewise, only grow at 0.7%. At the same time, China’s rebound is decelerating because of structural headwinds and risk-averse consumption. These countries disproportionately represent world GDP, so the aggregate slowdown translates to all the more.
All these issues notwithstanding, the World Bank is not foreseeing a world recession. Rather, it is cautioning against a decade of stagnant growth. The organization cites that 2025 can be the worst economic year of activity in the world without a recession since the financial crisis of 2008. Bizarrely, living standards in much of the world can stay flat or deteriorate unless there is robust policy action.
In the coming years, modest upside is foreseen by the World Bank if major economies lower trade barriers and fuel cross-border investment. An end to trade tensions, for example, would modestly raise growth potential. But with no synchronized policy reform, the 2020s could be a “lost decade” of subpar economic performance. The report calls on world leaders to pursue productivity-raising reforms and long-term fiscal sustainability as the number one priority to prevent rising inequality and debt in developing countries.
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