World Bank Cuts 2025 Growth Forecast To 2.3%

The World Bank has significantly revised its global economic outlook for 2025, slashing the growth forecast to just 2.3%, marking one of the slowest non-recessionary growth rates since the 2008 financial crisis.

Global Growth Hits a Wall

In its latest Global Economic Prospects report, the World Bank signals that the global economy has missed the opportunity for a “soft landing” — a smooth slowdown in growth without high inflation or major disruption. Instead, the world is now heading into a period of elevated economic uncertainty and sluggish growth, according to World Bank Chief Economist Indermit Gill.

Gill stated that the global economy is “once more running into turbulence,” and warned that without urgent policy corrections, there could be “deep harm to living standards.”

Trade Barriers and Uncertainty Weigh Heavily

The key reason behind this steep downgrade is the sharp rise in global trade barriers, with the World Bank citing new tariffs and unpredictable trade policies — especially from the United States — as the core disruptors.

Since the return of US President Donald Trump, the US has imposed sweeping new tariffs, including a 10% tax on imports from nearly all countries. These protectionist measures have increased domestic prices in the US and triggered retaliatory tariffs from other countries, creating a chain reaction across global markets.

This trade hostility is not only raising the cost of goods but also freezing business confidence. As companies hold back investment amid rising policy uncertainty, global trade is expected to slow dramatically. The World Bank projects global trade will grow by just 1.8% in 2025, a sharp fall from 3.4% in 2024, and a far cry from the 5.9% average growth seen in the 2000s.

U.S. Economy to Feel the Heat

The impact of the U.S.’s own trade stance is being felt at home. The World Bank has lowered the 2025 U.S. growth forecast to 1.4%, down from 2.3% just six months ago and from the strong 2.8% growth recorded in 2024.

The report cites “record-high uncertainty,” volatile financial markets, and rising tariffs as major concerns. These factors are expected to dampen consumer spending, private investment, and overall economic momentum.

Amid these tensions, U.S. and Chinese trade officials are scheduled to hold talks this week, as both sides seek to prevent further escalation.

A Decade of Weak Growth

Looking at the bigger picture, the World Bank projects that average global economic growth for the entire 2020s decade will be just 2.5%, the slowest decade of growth since the 1960s.

Although the report stops short of declaring a global recession, it does highlight the risk. If trade tensions worsen or if uncertainty remains elevated, the growth rate could drop further. That said, the risk of a full-blown global recession is currently estimated at under 10%.

However, the World Bank cautions that the global economy is increasingly vulnerable to external shocks — such as geopolitical tensions, energy price volatility, or financial instability — which could tip regions or even entire economies into recession.

Developing Countries to Bear the Brunt

Emerging markets and developing economies (EMDEs) are forecast to grow at 3.8% in 2025, down from 4.1% in earlier estimates. However, low-income countries are expected to suffer the most, with per capita incomes in many of these nations still 6% below pre-pandemic levels by 2027.

The World Bank predicts that it may take up to 20 years for poorer countries to fully recover from the setbacks of the 2020s, underscoring the urgent need for targeted support and reforms.

Silver Linings: India and Select EMDEs Show Resilience

Despite the overall grim outlook, some countries are bucking the trend. India remains a standout performer, expected to grow at 6.3% in 2025, though slightly down from 6.5% in 2024. Even this revised figure places India as the fastest-growing major economy in the world.

China’s growth is projected to remain stable at 4.5%, supported by increased government spending aimed at offsetting weaker exports to the U.S.

Other emerging markets continue to post modest growth, but challenges remain, especially for economies with high debt or limited fiscal space.

Conclusion: Cautious Road Ahead

The World Bank’s sobering 2025 forecast paints a clear message — without swift and coordinated action, the global economy could be heading into a prolonged period of weak growth and heightened uncertainty.

As trade tensions grow and policy unpredictability remains high, countries will need to focus on restoring confidence, investing in productivity, and supporting vulnerable economies to avoid long-term damage.