World Bank cuts global growth forecast amid trade turmoil
The World Bank has lowered its global growth forecast for 2025 to 2.3%, a reduction of 0.4 percentage points. This downgrade reflects the rising global economic uncertainty caused by higher tariffs. The report indicates that growth projections have been cut for nearly 70% of the world’s economies, including major players such as the United States, China, and the European Union. (Source: Reuters)
U.S. trade policy, particularly under President Trump, has caused a major upheaval. Tariffs have pushed the U.S. effective rate from under 3% to the mid-teens—its highest level in almost a century. Retaliatory measures by China and other countries have further disrupted global trade. As a result, trade growth in 2025 is expected to drop to just 1.8%, compared to 3.4% in 2024 and an average of 5.9% in the 2000s.
While the global economic environment remains fragile, the World Bank has stopped short of forecasting a recession. It states that growth in 2025 will be the weakest outside of a recession since the 2008 financial crisis. Key concerns include heightened uncertainty, weakening investment, and increasing financial market volatility. However, the likelihood of a global recession remains under 10%.
The revised outlook hits both advanced and developing economies. The U.S. growth projection has been cut by 0.9 percentage points to 1.4%, while the Eurozone and Japan are now expected to grow at just 0.7%. Emerging markets are forecasted to grow by 3.8%, slightly lower than the 4.1% projected earlier. Among the worst affected is Mexico, with its 2025 growth outlook slashed to a mere 0.2%. China, however, retains a 4.5% growth forecast, thanks to its available fiscal and monetary tools.
Despite the challenges, there are signs of cautious optimism. The World Bank projects that global trade could recover modestly in 2026, rising to 2.4%. Developments in artificial intelligence and new trade agreements might offer a fresh impetus to global growth. Deputy Chief Economist Ayhan Kose described uncertainty as “fog on a runway,” suggesting that while the trade engine has slowed, it could restart—albeit at a slower pace—once the fog lifts.
(Disclaimer: This slideshow has been sourced from Reuters)
