The World Bank has sharply downgraded its forecast for global economic growth in 2025, projecting a mere 2.3% expansion—the weakest pace since the 2008 financial crisis. The downgrade, announced in its semi-annual Global Economic Prospects report, reflects deepening concerns over trade disputes, investment stagnation, and slowing consumer demand across both advanced and developing economies.
Trade Conflicts Undermining Recovery
According to the report, prolonged geopolitical tensions—especially between the United States and China—continue to weigh heavily on global supply chains and investor confidence. Although some recent talks have hinted at thawing relations, uncertainty still lingers around tariffs and technology access, making businesses reluctant to invest in cross-border operations.
Developing Economies Hit Hardest
Emerging and developing markets are expected to feel the brunt of the slowdown. Fragile fiscal policies, coupled with high borrowing costs and weak export demand, are straining economies already hit by climate events, commodity price volatility, and post-pandemic debt burdens.
India & Southeast Asia Remain Bright Spots
While growth across much of the world is set to decelerate, the World Bank noted that India and select Southeast Asian countries are still poised for relatively strong growth. India, for instance, is projected to grow at around 6.6%, driven by robust domestic demand and infrastructure investment.
Stubborn Inflation & Central Bank Caution
Although inflation has cooled in some regions, price pressures remain sticky in parts of Europe and Latin America. Central banks are now in a delicate balancing act: keeping inflation in check without choking off already weak growth.
Risks and Recommendations
- Trade tensions and fragmented global supply chains
- Rising interest rates impacting both public and private investment
- Geopolitical risks including war, sanctions, and supply disruptions
- Climate change’s growing economic toll on food and water resources
The World Bank urged nations to double down on structural reforms, encourage green investment, and expand social safety nets to support vulnerable populations during this downturn.
Outlook: Brace for a Slower, Uneven Recovery
The report concludes that although a global recession is not the base-case scenario, the world economy remains vulnerable to shocks. For policymakers, the message is clear: mitigate uncertainty, boost productivity, and invest in resilience—or risk a prolonged era of sluggish growth.