On Tuesday, the World Bank downgraded its global growth forecast for 2025 by 0.4 percentage points, to 2.3%, citing rising tariffs and increasing uncertainty as “major obstacles” facing nearly all economies.
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In its semi-annual Global Economic Prospects report, shared by CNBC, the Bank lowered growth expectations for nearly 70% of all economies, including the US, China, Europe, and six emerging market regions, compared to forecasts made six months prior to President Donald Trump’s inauguration.
While the Bank no longer predicts a recession, it stated that global economic growth this year will be the weakest outside recession periods since 2008. By 2027, the average global GDP growth is expected to be only 2.5%, the slowest pace for any decade since the 1960s.
The report forecasts global trade growth at 1.8% in 2025, down from 3.4% in 2024 and about one-third of the 5.9% average in the 2000s.
These projections assume existing tariffs as of late May, including a 10% US tariff on imports from most countries, excluding tariff increases announced by Trump in April but delayed until July 9 to allow negotiations.
The Bank also expects global inflation to reach 2.9% in 2025, remaining above pre-COVID levels due to tariffs and tight labor markets.
The Bank emphasized that risks to the global outlook remain heavily skewed to the downside.
Models show that an additional 10 percentage point increase in average US tariffs, on top of the existing 10%, along with proportional retaliatory measures by other countries, could further reduce 2025 forecasts by 0.5 percentage points.
Such a trade escalation would lead to “a halt in global trade in the second half of this year, accompanied by widespread collapse in confidence, increased uncertainty, and financial market turmoil.”
— (Petra)
