The trade war and political uncertainty—mainly related to U.S. tariffs—are expected to slow global growth this year to its weakest pace since 2008, excluding global recessions.
According to the latest Global Economic Prospects report by the World Bank, although the world appeared to be heading for a “soft landing” after the pandemic just six months ago, the Bank noted that “the global economy today once again faces uncertainty,” leading it to downgrade growth forecasts for nearly 70% of all economies.
As for global expansion, growth is now projected to slow to 2.3% in 2025, almost half a percentage point lower than the pace forecast at the start of the year.
A global recession is not currently anticipated, but if projections for the next two years materialize, average growth over the first seven years of the 2020s will be the slowest for any decade since the 1960s, according to the World Bank. In addition to trade and political uncertainty, other “headwinds” include rising geopolitical tensions, increasingly frequent extreme climate events, and slower-than-expected growth in major economies—posing the risk of negative spillover effects.
“Outside of Asia, the developing world is becoming a no-growth zone,” said Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics.
