ABUJA, Nigeria (VOICE OF NAIJA)-According to the World Bank’s latest Global Economic Prospects report, increased trade tensions and policy uncertainty are likely to slow global growth to its lowest rate since 2008, excluding periods of global recession.
The report indicates that nearly 70% of economies across all regions and income groups have had their growth forecasts revised downward.
Global growth is now projected to slow to 2.3% in 2025 about half a percentage point lower than previously anticipated earlier in the year.
While a global recession is not currently forecast, the World Bank cautions that if projections hold, average global growth during the first seven years of the 2020s would mark the slowest pace for any decade since the 1960s.
“Outside of Asia, the developing world is becoming a development-free zone,” said Indermit Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank Group.
He added, “It has been advertising itself for more than a decade. Growth in developing economies has ratcheted down for three decades from six percent annually in the 2000s to five per cent in the 2010s to less than four per cent in the 2020s.
That tracks the trajectory of growth in global trade, which has fallen from an average of five per cent in the 2000s to about 4.5 per cent in the 2010s to less than three per cent in the 2020s. Investment growth has also slowed, but debt has climbed to record levels.”
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The World Bank expects growth to decelerate in almost 60% of developing economies in 2025, averaging just 3.8%, with a slight improvement to 3.9% in 2026 and 2027 still over a percentage point below the average seen in the 2010s.
For low-income countries, growth is forecast at 5.3% in 2025, a 0.4-point downgrade from earlier projections.
The slowdown is expected to hamper efforts in developing economies to create jobs, reduce poverty, and narrow income disparities with advanced economies.
Per capita income growth in developing economies is forecast to reach 2.9% in 2025, falling 1.1 percentage points short of the 2000 2019 average.
Even if GDP growth in developing countries excluding China holds steady at 4% through 2027, it would take nearly two decades to return to pre-pandemic output trajectories.
The report also highlights inflationary pressures, with global inflation forecast to average 2.9% in 2025 remaining above pre-COVID levels driven in part by rising tariffs and tight labor markets.
However, the World Bank notes that global growth could recover more quickly if trade tensions ease.
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The report estimates that resolving current trade disputes and halving tariffs could boost global growth by 0.2 percentage points on average across 2025 and 2026.
“Emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict,” said Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose.
He continued, “The smartest way to respond is to redouble efforts on integration with new partners, advance pro-growth reforms, and shore up fiscal resilience to weather the storm.
With trade barriers rising and uncertainty mounting, renewed global dialogue and cooperation can chart a more stable and prosperous path forward.”
The report urges developing nations to respond by pursuing new trade and investment partnerships, diversifying trade through regional agreements, and focusing limited fiscal resources on supporting vulnerable populations.
To foster stronger economic growth, it recommends improving the business environment, enhancing labor market efficiency, and investing in skills development to better connect workers with opportunities.