The world economy is bracing for a significant decline. Growth is forecast at 2.3% in 2025, down from earlier projections. The World Bank’s latest Global Economic Prospects report attributes this to rising trade tensions and persistent global uncertainty.
This pace marks the slowest growth rate outside of recessions since the 2008 financial crisis, echoing concerns from global economists. Forecasts were downgraded in nearly 70% of global economies. Poorer nations face the most pronounced setbacks, the report highlights.
The downturn will deeply affect efforts to create jobs, reduce poverty, and bridge income gaps in low-income countries. “We’re entering turbulent waters again. Without correction, living standards worldwide could take a serious hit,” said Chief Economist Indermit Gill.
DEVELOPING NATIONS HIT HARDEST BY SLUGGISH OUTLOOK
Emerging market and developing economies (EMDEs) are projected to grow just 3.8% in 2025, and 3.9% in 2026 and 2027. This is more than one percentage point lower than average growth rates during the 2010s, indicating a worrying slowdown trend.
These conditions will impact income convergence with wealthier nations and delay crucial poverty alleviation goals in these regions. Developing nations will struggle to attract investment, sustain productivity, and equip workers for rapidly shifting job markets. The report warns that countries in fragile and conflict situations (FCS) face even tougher conditions without tailored reforms and global help.
TRADE BARRIERS, POLICY CONFUSION CRIPPLE GLOBAL RECOVERY
Protectionism and tariff hikes are causing ripple effects across global markets, raising costs and dampening cross-border commerce.
The report assumes current tariff levels remain, but warns new barriers or continued uncertainty could worsen economic performance. Escalating trade restrictions, rising geopolitical tensions, and frequent climate shocks add pressure to already fragile economic systems.
Foreign direct investment (FDI) inflows into EMDEs have halved since 2008 and remain low, further constraining growth potential. Global supply chains remain fragile, and investor confidence is fragile amid fears of unresolved disputes and sluggish demand.
URGENT NEED FOR MULTILATERAL ECONOMIC COOPERATION
The World Bank calls for renewed international coordination to restore transparent and stable trade frameworks. Strengthening business environments and lowering barriers is crucial to unlock productivity and foster economic inclusion.
Major economies must rebuild broken relationships and support reforms that benefit both developed and developing markets. Cooperation and consensus will be critical in turning the tide against stagnation and ushering in more predictable trade policies. Gill emphasized, “Economic cooperation is better than any alternative. It’s necessary for restoring global trust and shared growth.”
NATIONAL REFORMS CRITICAL FOR GROWTH REVIVAL
Domestic action is equally vital. Countries must boost revenue, contain inflation, and focus spending on long-term development.
Governments should prioritize investment in human capital, institutional quality, and labor market modernization. Attracting private capital and stimulating employment opportunities are vital steps toward long-term resilience and social stability.
EMDEs need smart policy designs tailored to current challenges—especially those facing political instability or ongoing violence. Combining sound domestic governance with multilateral backing offers the clearest path to reversing declining economic prospects.
REGIONS FACE UNIQUE HURDLES IN WEAK OUTLOOK
All developing regions will feel the global slump, though some face sharper hits due to trade reliance or commodity dependence.
Growth in East Asia, the Pacific, and Europe and Central Asia will decelerate as trade friction hampers export demand. Latin America and the Caribbean will post the lowest growth due to structural vulnerabilities and limited external support. South Asia’s economy will cool slightly, while commodity-driven economies in Africa and the Middle East will also slow down.
Across the board, January’s growth expectations have been cut as uncertainty disrupts supply chains and investor sentiment.
PATH FORWARD HINGES ON TRADE STABILITY AND LOCAL INNOVATION
World leaders must act decisively to dismantle economic roadblocks and restore confidence in global systems. For developing economies, the way forward lies in ambitious reforms, innovation, and stronger partnerships with the private sector.
Only by aligning global efforts with local needs can the world economy avoid a lost decade of underperformance. The World Bank urges leaders to seize this pivotal moment and ensure shared prosperity remains within reach for all nations.
BOLD ACTION NEEDED IN A FRAGILE ECONOMIC ERA
The outlook paints a sobering picture—slow growth, rising risks, and deeper inequality if inaction persists. The coming years will test the world’s economic resilience and political will to confront collective challenges together.
Stability and progress are still achievable—but only if cooperation and reform remain at the core of the global response.