World Bank cuts 2025 forecasts for 70% of economies as global growth slows to 2.3%

Dubai: The global economy is heading for its slowest non-recessionary performance since 2008, with growth expected to reach just 2.3% in 2025, according to the World Bank’s latest Global Economic Prospects report.

The bleak outlook comes amid rising trade tensions, persistent policy uncertainty, and a slowdown in investment—forcing downgrades in growth forecasts for nearly 70% of countries worldwide, across all income levels and regions.

The World Bank has lowered its 2025 projections by nearly half a percentage point from earlier expectations, signalling that even absent a formal global recession, economic momentum is stalling in much of the world.

“This marks the weakest stretch of global growth outside of recessions in decades,” the report states. If the current projections hold, the average global growth rate for the 2020s would be the lowest since the 1960s.

While growth in low-income economies is still expected to reach 5.3% in 2025, even that is 0.4 points lower than forecasts made earlier this year. For the developing world as a whole, growth is forecast to average just 3.8% in 2025—more than a percentage point below the average of the 2010s.

The World Bank warned that the continued slowdown will hinder job creation, poverty reduction, and income convergence with advanced economies. Per capita income growth in developing countries is projected to be 2.9% in 2025, still far below the pre-pandemic norm.

“Outside of Asia, the developing world is becoming a development-free zone,” said Indermit Gill, World Bank Group Chief Economist. “Growth has slowed sharply over the decades, and investment is down—while debt is climbing to record levels.”

According to the report, global trade growth has also slumped—from 5% in the 2000s, to less than 3% in the 2020s. At the same time, tariff increases and tight labour markets are keeping inflation elevated.

Global inflation is projected to average 2.9% in 2025, still above pre-COVID levels. The World Bank warns that these conditions are squeezing household incomes, investment decisions, and fiscal policy flexibility.

Despite the grim picture, the World Bank notes that a resolution of key trade disputes could partially restore global momentum. If global tariffs were halved from May 2025 levels, global growth could improve by 0.2 percentage points in both 2025 and 2026, the analysis shows.

“Emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict,” said M. Ayhan Kose, Deputy Chief Economist. “To stay resilient, countries must double down on reforms and fiscal planning.”

The report urges developing economies to:

For countries facing active conflicts or economic crises, global collaboration and concessional financing will be key to avoiding further economic distress.

With trade fragmentation rising and geopolitical uncertainty unlikely to fade soon, the World Bank says coordinated global action is essential to restore stability and protect the world’s most vulnerable economies.