World Bank Cuts 2025 Global Growth Forecast to 2.3%

The World Bank has revised its global growth forecast for 2025 to 2.3 percent, significantly lower than its earlier estimate of 2.7 percent released in January. This marks the slowest rate of global economic expansion in almost two decades, excluding the global financial crisis of 2009 and the COVID-19-driven downturn in 2020.

The outlook for 2026 was also downgraded, with the Bank now expecting global output to expand by just 2.4 percent. The revisions reflect growing concerns over rising protectionism, weak investment, and persistent global uncertainty.

Trade Tensions at the Core of the Downturn

According to the World Bank’s report, a major factor behind the weaker outlook is the continued rise in trade barriers and policy fragmentation. These developments are hampering cross-border investment flows and disrupting global supply chains.

The Bank emphasized that lowering trade restrictions could make a measurable difference. If tariffs were halved from their current levels, global growth could be supported by an average of 0.2 percentage points over the 2025–2026 period.

Regional Revisions Reflect Diverging Trends

The updated forecasts reveal mixed regional performance, with advanced economies facing sharp slowdowns and emerging markets showing more resilience:

United States: Growth forecast for 2025 was reduced from 2.3 percent to 1.4 percent. The downgrade is attributed to higher interest rates, tighter credit conditions, and cooling consumer demand.
Eurozone and Japan: Both economies are now expected to expand by just 0.7 percent in 2025, reflecting weak domestic activity and ongoing trade headwinds.
India: The 2025 outlook was revised from 6.7 percent to 6.3 percent, still among the strongest globally, though slightly below expectations.
Mexico: Growth expectations were slashed from 1.5 percent to just 0.2 percent, signaling deepening challenges in Latin America’s second-largest economy.
China: The Bank held its 2025 forecast steady at 4.5 percent. Despite global uncertainty, China’s growth is expected to remain relatively stable, supported by domestic policy stimulus and gradual recovery in consumer activity.

Call for Multilateral Cooperation

The report urges greater international coordination to mitigate downside risks. The World Bank warned that without policy clarity and stronger cooperation, especially on trade and investment rules, the current environment could lead to a prolonged period of sluggish global growth.

The Bank’s economists stressed that sustained recovery will require removing barriers to trade, enhancing transparency in economic policies, and strengthening institutions in both advanced and developing economies.

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