Today's Edition
WASHINGTON (REUTERS)
The World Bank on Tuesday slashed its global growth forecast for 2025 by 0.4 percentage point to 2.3%, saying that higher tariffs and heightened uncertainty posed a "significant headwind" for nearly all economies.
In its twice-yearly Global Economic Prospects report, the bank lowered its forecasts for nearly 70% of all economies - including the United States, China and Europe, as well as six emerging market regions - from the levels it projected just six months ago before US President Donald Trump took office.
Trump has upended global trade with a series of on-again, off-again tariff hikes that have increased the effective US tariff rate from below 3% to the mid-teens - its highest level in almost a century - and triggered retaliation by China and other countries.
The World Bank is the latest body to cut its growth forecast as a result of Trump's erratic trade policies, although US officials insist the negative consequences will be offset by a surge in investment and still-to-be approved tax cuts.
The bank stopped short of forecasting a recession, but said global economic growth this year would be its weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5%, the slowest pace of any decade since the 1960s.
The report forecast that global trade would grow by 1.8% in 2025, down from 3.4% in 2024 and roughly a third of its 5.9% level in the 2000s. The forecast is based on tariffs in effect as of late May, including a 10% US tariff on imports from most countries. It excludes increases announced by Trump in April and then postponed until July 9 to allow for negotiations.
The bank said global inflation was expected to reach 2.9% in 2025, remaining above pre-COVID levels, given tariff increases and tight labor markets.
Nonetheless, it said the risk of a global recession was less than 10%.
The World Bank said the global outlook had "deteriorated substantially" since January, mainly due to advanced economies, now seen growing by just 1.2%, down half a point, after expanding 1.7% in 2024.
The US forecast was slashed by 0.9 percentage point from its January forecast to 1.4%, and the 2026 outlook was lowered by 0.4 percentage point to 1.6%. Rising trade barriers, "record-high uncertainty" and a spike in financial market volatility were expected to weigh on private consumption, trade and investment, it said.
Growth estimates in the euro area were cut by 0.3 percentage point to 0.7% and in Japan by 0.5 percentage point to 0.7%.
It said emerging markets and developing economies were expected to grow by 3.8% in 2025 versus 4.1% in January's forecast.
Poor countries would suffer the most, the report said. By 2027 developing economies' per capita GDP would be 6% below pre-pandemic levels, and it could take these countries - minus China - two decades to recoup the economic losses of the 2020s.
Mexico, heavily dependent on trade with the US, saw its growth forecast cut by 1.3 percentage points to 0.2% in 2025.
The World Bank left its forecast for China unchanged at 4.5% from January, saying Beijing still had monetary and fiscal space to support its economy and stimulate growth.
