World Bank Lowers Global Economic Growth Forecast to 2.3% for 2025 Amid Trade Tensions
World Bank revises global growth forecast to 2.3% for 2025 due to trade tensions.
Key Points
- • World Bank lowers 2025 growth forecast to 2.3%, down by 0.4 percentage points.
- • U.S. economic growth projected at 1.4% for 2025, while Eurozone expected at 0.7%.
- • Emerging economies anticipate growth of 3.8%, with China at 4.5% and India at 6.3%.
- • Indermit Gill stresses the need for trade diversification and reforms to improve business climates.
The World Bank has made significant revisions to its global economic growth forecast for 2025, now projecting a growth rate of only 2.3%. This adjustment reflects a downward revision of 0.4 percentage points from earlier predictions, primarily driven by ongoing trade tensions and geopolitical uncertainties. Indermit Gill, the World Bank's Chief Economist, cautioned that the 2020s could witness the slowest growth rates in sixty years if current trends persist.
This revised forecast reflects the impact of tariffs and other trade barriers, significantly attributed to the trade policies established during Donald Trump's presidency. The U.S. economy's growth has also been downgraded to 1.4% for 2025, a notable decrease of almost one percentage point from previous estimates. On the European front, the Eurozone is projected to experience a meager growth rate of just 0.7%.
Emerging economies are not spared from this downturn, with their collective growth expected to settle at 3.8%, a drop of approximately one percentage point compared to the previous decade. Notably, China's expected growth rate stands at 4.5%, while India is projected to maintain a stronger pace at 6.3% for the same period.
Gill emphasized that the current climate of high political uncertainty and fragmented trade relationships severely undermines the economic outlook for both 2025 and 2026. He indicated that if corrective actions aren't taken soon, the implications for living standards globally could be dire. The World Bank also highlighted the necessity for countries to collaborate in easing trade barriers and diversifying trade partnerships to buffer against future shocks and bolster regional economic ties.
These revised outlooks emerge against the backdrop of a decade marked by the most sluggish growth since the 1960s, accentuated by the persistent repercussions of the trade war, which has impacted economic stability worldwide. In light of these findings, the World Bank emphasizes the urgency of reforms, particularly in developing nations, to enhance business climates and fortify financial frameworks.