New Delhi: Global economic growth is expected to slow sharply in 2025, hitting its lowest non-recessionary pace since 2008, as trade tensions and policy uncertainty dampen investment and productivity, the World Bank warned in its latest Global Economic Prospects report.
The multilateral institution projects global growth at 2.3% for 2025—nearly half a percentage point lower than earlier estimates—amid widespread downgrades across nearly 70% of all economies. While a global recession is not forecast, the cumulative slowdown signals a troubling trend. If current projections hold, the first seven years of the 2020s will mark the weakest start to a decade in over 60 years.
“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. “Growth in developing economies has steadily declined—from 6% annually in the 2000s to under 4% in the 2020s—mirroring the slowdown in global trade and investment.”
Trade volumes have dropped from 5% in the early 2000s to under 3% in the current decade, while debt levels in emerging markets have reached historic highs. Investment has not kept pace, further curbing long-term growth potential.
Developing economies are expected to grow by just 3.8% in 2025, with a modest uptick to 3.9% in 2026 and 2027—well below the 5% average seen in the 2010s. For low-income countries, the growth outlook has been trimmed to 5.3%, a 0.4 percentage point downgrade from previous forecasts. Global inflation remains elevated too, projected at 2.9% in 2025, still above pre-pandemic levels, with tariff hikes and tight labour markets driving price pressures.
The slowdown poses serious risks for job creation, poverty reduction, and income convergence between developing and advanced economies. Per capita income in developing nations is expected to grow by just 2.9% in 2025—down 1.1 percentage points from the average before the pandemic.
According to the report, unless a significant course correction is made, many developing economies (excluding China) may take up to two decades to recover to their pre-pandemic growth trajectory.
However, the World Bank also sees potential for improvement if trade tensions ease. A resolution that halves existing tariffs could lift global growth by 0.2 percentage points in 2025 and 2026, the report estimates.
“Emerging markets once thrived on trade integration but now find themselves at the heart of a global trade conflict,” said M. Ayhan Kose, Deputy Chief Economist at the World Bank. “The way forward lies in new partnerships, structural reforms, and improved fiscal resilience.”
The World Bank calls for developing countries to diversify trade through regional agreements, pursue pro-growth reforms, and focus public spending on the most vulnerable. Strengthening fiscal frameworks and improving business environments—especially by equipping workers with future-ready skills—will be essential to unlocking sustained economic recovery.
It also urged renewed global cooperation, concessional financing, and targeted support for fragile states and conflict-affected regions, warning that without coordinated action, long-term development goals could slip further out of reach.
