THE World Bank has downgraded its global economic growth forecast for 2025 to 2.3 per cent, the slowest pace since the 2008 financial crisis outside of formal recessions, citing persistent trade barriers, global uncertainty and rising financial volatility.
In its June 2025 edition of the Global Economic Prospects report, the Bank revised down its earlier projection of 2.7 per cent issued in January. The downgrade, it said, is largely driven by weaker performance in advanced economies and a stalling recovery in emerging market and developing economies (EMDEs).
“Progress by emerging market and developing economies (EMDEs) in closing per capita income gaps with advanced economies and reducing extreme poverty is anticipated to remain insufficient,” the Bank stated.
Global growth is expected to firm only modestly to 2.5 per cent over 2026–2027, as international trade gradually adjusts to higher tariffs and policy uncertainty eases.
However, the report warned that the outlook remains fragile: “Global growth could turn out to be lower if trade restrictions escalate or if policy uncertainty persists, which could also result in a build-up of financial stress.”
Other downside risks include underperformance in major economies, increased geopolitical conflict, and extreme weather events. On the other hand, growth could be supported if trade tensions are resolved through lasting agreements among major economies.
The World Bank stressed the need for stronger multilateral efforts to create a more stable and transparent global trade environment and to assist vulnerable economies, particularly those facing conflict and debt crises.
“National policy makers need to contain risks related to inflation as well as strengthen their fiscal positions by raising additional domestic revenues and reprioritising spending,” the report said.
Structural reforms will be vital to improving productivity and job creation in EMDEs. The Bank highlighted the importance of enhancing institutional quality, stimulating private investment, developing human capital and improving labour markets.
On inflation, the Bank noted continued volatility in price pressures across both developed and emerging economies.
“Global headline consumer price inflation has remained elevated above pre-pandemic norms over the past year, briefly edging higher in some advanced economies in early 2025,” it said. Meanwhile, core inflation in EMDEs has been driven by rising service sector costs and wage growth.
The Bank concluded that both global cooperation and domestic reform are necessary to weather the challenges ahead and restore sustainable growth momentum. - June 11, 2025
