The World Bank has a dire alert on the state of the global economy. In its most recent twice-a-year report, it lowered growth projections for some of the world’s largest economies, like Japan, Europe and the United States. The organization’s latest long-term forecast includes a starkly different picture, with global growth sputtering to an anemic 2.3% rate by 2025. That’s a decrease of 0.4% from earlier estimates, set in January. The report calls attention to a dangerous trend. At the same time, almost two-thirds of countries around the world have revised their growth expectations downwards over the last half-year.
Global economy is expected to grow at its slowest pace in more than 40 years, the World Bank says. That reduced growth arc of 2.9% over the next five years is a reduction of one-tenth from the previous forecast at 3.1%. The World Bank projects that growth will even recover slightly, to 2.6% in 2027. Even still, this figure is not enough to ensure robust economic wellbeing.
The report attributes the downward trend to the impact of increasing inflation and escalating tariffs. This trend is particularly striking in light of the recent direction of U.S. trade policy under President Donald Trump. When Trump first implemented an effective universal 10% import tariff, financial markets crumbled. The last major crash of this scale was in early April. In May, a trade ruling found that most of these tariffs were illegal. The Trump administration won an appeal to keep them in place for the time being.
“The report states, ‘Against the backdrop of heightened policy uncertainty and increased trade barriers, the global economic context has become more challenging.’ The World Bank warned that if the U.S. raised tariffs even more, it would be forced to downgrade its growth projections even more.”
In contrast to the downgrades observed in other regions, the World Bank did not lower its growth forecast for China. The agency observed that China has enough fiscal markets’ stability to weather “strong headwinds” caused by worldwide political unpredictability.
That said, the report did point to rising concerns over inflation and trade tensions. It meant that the likelihood of a global recession in the next year is less than 10% right now. It warned of potential consequences from “global trade seizing up in the second half of this year, accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets.”
The World Bank’s previous forecasts were made prior to Trump’s inauguration, indicating a shift in economic expectations as his administration continues to navigate complex international trade relationships. Just days before, negotiators from the U.S. and China had met for a new round of talks in central London to resolve the ongoing U.S.-China trade war. This action reflects ongoing work to stabilize economic conditions.