Global Growth Forecast Cut by World Bank Amid Intensifying Trade Tensions

Global economic growth is set to experience a significant slowdown this year, primarily due to trade disruptions caused by extensive U.S. tariffs, according to the World Bank’s latest economic outlook. The institution has revised its global GDP growth forecast for 2025 down to 2.3%, a decrease from the previously estimated 2.7%. This marks the slowest rate of growth outside of global recessions in nearly two decades, raising concerns about the potential impact on living standards worldwide.

World Bank’s Revised Growth Forecast

In its recent report, the World Bank highlighted a troubling trend in global economic performance. The organization has cut its growth forecast for 2025 to 2.3%, a notable decline from the 2.7% projected earlier this year. This adjustment reflects a deteriorating trade environment and declining investor confidence. Indermit Gill, the World Bank Group’s chief economist, emphasized that this represents the weakest growth performance in 17 years, excluding periods of outright recession. The report underscores the significant challenges posed by high levels of policy uncertainty, particularly stemming from U.S. trade policies under President Donald Trump. The imposition of a 10% import tariff on nearly all U.S. trade partners has created a climate of uncertainty, which has been temporarily suspended until July. However, the long-term implications of these tariffs remain unclear.

Impact on India’s Economic Growth

The World Bank has also revised its economic growth projection for India, forecasting a decrease to 6.3% for the fiscal year 2025-26. This adjustment is attributed to pressures on exports resulting from global uncertainties. Despite this reduction, India is still expected to be the fastest-growing major economy in the world. Earlier this year, the World Bank had estimated India’s growth at 6.7%, but the ongoing global trade tensions have necessitated a reassessment. The report indicates that while advanced economies are facing steeper cuts in their growth forecasts, emerging markets, particularly those reliant on commodity exports, are grappling with a challenging mix of low prices and market volatility.

Challenges for Developing Economies

The World Bank’s outlook paints a grim picture for developing economies, particularly those that are commodity exporters. Approximately 60% of these nations are currently dealing with falling prices and unpredictable global demand, which Gill described as a “very nasty combination.” The bank projects that global growth will average just 2.5% for the remainder of the decade, marking the slowest growth rate since the 1960s. By 2027, high-income countries are expected to return to their pre-pandemic growth trajectories, while developing nations, excluding China, may see per capita GDP remain 6% below pre-COVID forecasts. Gill warned that it could take these economies nearly two decades to recover from the economic losses incurred during the 2020s.

Policy Recommendations and Global Outlook

Despite the bleak outlook, the World Bank remains optimistic that decisive policy actions could mitigate long-term damage. Gill urged G20 economies to avoid trade fragmentation and recommended that developing nations lower tariffs across the board, not just with the U.S. He emphasized the importance of harmonizing cross-border regulations to foster sustainable growth. The report also noted that tariffs in developing countries tend to be higher than in advanced economies, often due to protectionist strategies or limited government revenue sources. The World Bank’s warnings coincide with similar downgrades from other global agencies, including the OECD and the IMF, which have also revised their growth projections downward in light of the ongoing trade tensions.

Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.

Follow Us on Twitter, Instagram, Facebook, & LinkedIn