The World Bank’s latest Global Economic Prospects report, released on June 10, 2025, projects global economic growth to slow to 2.3% in 2025, marking the weakest pace since 2008 outside of outright global recessions. This downturn is attributed to heightened trade tensions and policy uncertainty, leading to growth forecasts being cut in nearly 70% of all economies across all regions and income groups.
The report highlights that the global economy is facing substantial headwinds, emanating largely from an increase in trade barriers and heightened global policy uncertainty. These factors have led to a broad-based growth slowdown through trade, commodity, financial, and confidence channels. The World Bank notes that the sharp increase in tariffs and the ensuing uncertainty are contributing to this deceleration.
Chief Economist Indermit Gill emphasized the challenges faced by developing economies, stating, “Outside of Asia, the developing world is becoming a development-free zone.” He pointed out that growth in developing economies has been declining for three decades, from an average of 6% annually in the 2000s to less than 4% in the 2020s. This decline mirrors the trajectory of global trade growth, which has also fallen significantly over the same period.
The report also underscores the impact of trade tensions on major economies. The U.S. economy is predicted to grow at a sluggish 1.4% in 2025, half the rate of 2024, due to widespread tariffs and increased domestic costs. China’s economy is expected to slow to 4.5%, influenced by tariffs, a weakened real estate market, and demographic challenges. European growth is forecasted at a mere 0.7%, while India remains the fastest-growing major economy at 6.3%, though slightly below previous projections.
The World Bank warns that without prompt policy adjustments, the global economy risks serious harm to living standards. The organization suggests that halving current tariffs could boost global growth by 0.2 percentage points in 2025 and 2026. Additionally, the report calls for governments to rein in fiscal deficits and focus on employment initiatives, particularly in regions with growing working-age populations.
The report concludes that the global economy is at a critical juncture, and coordinated policy responses are essential to address the challenges of trade disputes, inflation, and geopolitical instability. Without decisive action, the world may face a prolonged period of subdued growth and increased economic vulnerability.
