Finance
World Bank Warns of Worst Decade for Global Growth Since 1960s
- The World Bank forecasts that the 2020s will witness the glutted economic expansion after the 1960s, downgraded due to trade tensions and policy uncertainty, to a 2.3% growth rate in 2025.聽
- For protraction, the developing economies account for slowed growth, high debt, and little fiscal space, hence impelling calls for global cooperation and strategic reforms to revive prosperity and thereby aggravate the reduction of poverty.
The World Bank has forecast that the global economy is facing a daunting challenge, and it is expected to witness its worst decade of growth since the 1960s during the 2020s. This alarming prediction has been given in the Global Economic Prospects report by the World Bank, essentially citing growing tensions in trade between nations, policy uncertainty, and established economic problems faced by developing nations. The world would, therefore, witness very rough times, with a serious consequence for worldwide wealth creation and poverty alleviation.
A Bleak Economic Forecast
The World Bank鈥檚 latest projections indicate that global economic growth will slow to 2.3% in 2025, a significant downgrade from the 2.7% forecasted in January 2025. This represents the weakest growth rate in 17 years, excluding the recessions of 2009 and 2020. Looking further ahead, the report estimates that global GDP growth will average just 2.5% by 2027, making the 2020s the slowest decade for growth since the 1960s. This forecast assumes that current tariff levels, as of late May 2025, remain in place, but further trade disruptions could push growth even lower.
Drivers of the Slowdown
The primary factors behind this grim outlook are heightened trade tensions and policy uncertainty. Recent increases in tariffs, particularly those associated with U.S. policies under President Donald Trump, have disrupted global trade flows. The World Bank notes that if tariffs were halved, global growth could improve by 0.2 percentage points, underscoring the significant impact of trade barriers. Additionally, developing economies face mounting challenges, including ballooning government debt and constrained fiscal space, which limits their ability to stimulate growth. The CNN report highlights that these issues are compounded by reduced international aid and high interest rates.
Impact on Developing Economies
Developing economies, which account for 60% of global growth, are projected to grow at around 4% over the next two years. However, this pace is slower than pre-pandemic levels and insufficient to achieve significant poverty reduction or close income gaps with advanced economies. Low-income economies are expected to see growth rise to 5% in 2024 from 3.8% in 2023, but forecasts for three out of four low-income countries have been downgraded since January. In Sub-Saharan Africa, growth is forecasted to increase slightly to 3.7% in 2025, but persistent domestic and external challenges, such as high debt and climate-related risks, continue to hinder progress.
A Call for Global Cooperation
The emphasises the need for bold policy measures to address these challenges. Indermit Gill, World Bank Group Chief Economist, calls for a 鈥渞eset鈥� in global economic policy, stating, 鈥淭he time has come for renewed global cooperation, restored fiscal responsibility, and a relentless focus on creating jobs.鈥� The report recommends that developing economies pursue strategic trade and investment partnerships, modernise transportation infrastructure, and standardise customs processes to enhance trade efficiency. Sound macroeconomic policies are also critical to help these nations weather the global economic storm.
Voices from the World Bank
Indermit Gill further warned, 鈥淕lobal growth this year is expected to be the weakest in 17 years, outside of outright recessions. By 2027, global GDP growth is expected to average just 2.5% in the 2020s鈥攖he slowest pace of any decade since the 1960s.鈥� He added, 鈥淚nternational discord鈥攑articularly over trade鈥攈as upended many of the policy certainties that helped shrink extreme poverty and expand prosperity after World War II.鈥� These statements, reported in the Bloomberg article, underscore the urgency of addressing current economic challenges.
Conclusion
The World Bank鈥檚 warning of the weakest decade for global growth since the 1960s is a clarion call for action. With trade tensions and policy uncertainty threatening to derail economic progress, the need for global cooperation has never been greater. Developing economies, in particular, face an uphill battle to achieve sustainable growth and reduce poverty. By embracing strategic reforms and fostering international partnerships, the global community can work toward a more resilient and inclusive economic future. The stakes are high, but so is the potential for meaningful change.
