World Bank Predicts Global Economic Growth to Slump to 2.3% in 2025

The World Bank's June 2025 "Global Economic Prospects" report projects a significant slowdown in global economic growth, forecasting a rate of 2.3% for the year—a notable decline from the earlier estimate of 2.7%. This marks the slowest growth rate since 2008, excluding periods of global recession.

The downward revision is primarily attributed to escalating trade tensions and heightened policy uncertainty, which have led to growth forecast downgrades in nearly 70% of economies across various regions and income groups. The report underscores the need for global cooperation to restore a stable international trade environment and support vulnerable countries facing conflict, debt burdens, and climate change.

"The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty," said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics.

The report highlights that the increase in tariffs and the ensuing uncertainty are contributing to a broad-based growth slowdown and deteriorating prospects in most of the world’s economies. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs.

Regionally, developed economies are forecast to grow at 1.3% in 2025, down from 1.8% in 2024, reflecting weakening private investment, trade tensions, and ongoing policy uncertainty. Developing economies have also seen growth projections downgraded, with average growth now forecast at 4.0% in 2025, compared to 4.2% in 2024, reflecting significant regional disparities.

The World Bank notes that if current trade disputes were resolved with agreements that halve tariffs relative to their levels in late May, global growth could be stronger by about 0.2 percentage points on average over the course of 2025 and 2026.

The slowdown in global growth, particularly in EMDEs, could hinder efforts to boost job creation and reduce extreme poverty. The challenges are exacerbated by subdued foreign direct investment into these economies. The report emphasizes the need for global cooperation to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change.

The projected global growth rate of 2.3% for 2025 is the slowest since 2008, excluding periods of global recession. This highlights the significant impact of current trade tensions and policy uncertainties on the global economy.

The World Bank's June 2025 "Global Economic Prospects" report serves as a critical indicator of the challenges facing the global economy. The projected slowdown underscores the need for concerted efforts to address trade tensions and policy uncertainties to foster sustainable economic growth worldwide.