The global economy is heading for its worst growth streak since 2008, according to the World Bank.

 

This turbulence has led to a reduction in growth forecasts for almost 70% of all economies, affecting all regions and income groups.

 

It is projected that Global growth is expected to slow to 2.3% in 2025, almost half a percentage point below the rate expected at the beginning of the year. Although a global recession is not anticipated, if these forecasts materialize, average global growth in the first seven years of the 2020s will be the slowest recorded since the 1960s.

 

"The developing world is becoming a development-free zone."

 

Indermit Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank Group, warned about the situation in emerging economies. “Apart from Asia“The developing world is becoming a development-free zone,” Gill said. He explained that growth in these economies has steadily declined for three decades, falling from 6% annually in the 2000s to 5% in the 2010s, and then to less than 4% in the current 2020s. This trend, according to Gill, parallels the slowdown in global trade and the unprecedented rise in debt.

 

Growth is expected to slow in nearly 60% of all developing economies this year, averaging 3.8% in 2025, before rising slightly to 3.9% in 2026 and 2027. This is more than 2010 percentage point below the 0.4s average. Low-income countries, in particular, will see their growth forecasts for this year reduced by 5.3 percentage points, to XNUMX%.

Impact on poverty and inflation

 

The slowdown in global growth will hamper developing economies' efforts to create jobs, reduce extreme poverty, and close the per capita income gap with advanced economies. Per capita income growth in developing economies is projected at 2.9% in 2025, significantly below the 2000-2019 average. The report warns that if this trend continues, It would take about two decades for developing economies (excluding China) to return to the economic production trajectory prior to the pandemic.

 

Tariff increases and tight labor markets are putting upward pressure on global inflation, which is projected at 2.9% in 2025, still above pre-pandemic levels.

 

Possible paths to recovery

 

Despite the bleak outlook, the World Bank suggests that the recovery could be faster than expected if major economies manage to mitigate trade tensions, thereby reducing regulatory uncertainty and financial volatility. An analysis in the report concludes that if current trade disputes were resolved with agreements that cut tariffs to half their May levels, global growth would be 0.2 percentage points stronger on average during 2025 and 2026.

 

Mr. Ayhan Kose, Deputy Chief Economist and Director of the World Bank's Prospects Group, emphasized the need for an adaptive strategy for emerging economies. “Emerging markets and developing economies have reaped the rewards of trade integration, but now they find themselves on the front lines of a world trade conflict“Kose said. He suggested that the smartest response is to “redouble integration efforts with new partners, promote growth-oriented reforms, and bolster fiscal resilience to weather the storm.”

 

The report recommends that, in the face of rising trade barriers, developing economies should pursue broader liberalization, establishing strategic partnerships for trade and investment, and diversifying their trade relations. To accelerate growth, it is crucial to improve the business climate, promote productive employment through worker training, and strengthen labor markets. Finally, global collaboration, through multilateral interventions and concessional financing, is essential to support the most vulnerable developing economies, especially those affected by conflict.