The World Bank has significantly lowered its global economic growth forecast for 2025, attributing the reduction to ongoing trade tensions and policy uncertainties, exacerbated by recent U.S. tariffs. The new projection anticipates a global GDP growth of just 2.3 percent, a decrease from the 2.7 percent forecasted earlier this year. This adjustment marks the slowest rate increase since the 1960s and contributes to a series of downgrades by major international organizations.
This economic outlook adjustment comes amid a backdrop of global trade disruptions, largely influenced by President Donald Trump's imposition of a 10 percent tariff on imports from most U.S. trading partners. Additionally, higher tariffs have been placed on steel and aluminum imports, causing further strain. These measures have increased the U.S. effective tariff rate to its highest level in nearly a century. Although the U.S. and China have temporarily halted their trade war, long-term resolutions remain uncertain.
The World Bank's chief economist indicated that this environment of elevated policy uncertainty and fragmented trade relations is worsening growth and inflation prospects. Many economies, particularly in emerging markets, are facing challenging conditions with suppressed commodity prices and market volatility. The World Bank cautions that without prompt corrective actions, living standards could be adversely affected.
The outlook for global GDP growth over the next decade is grim, with expectations averaging just 2.5 percent by 2027, potentially marking the slowest growth since the 1960s. While advanced economies might reach pre-pandemic per capita GDP levels, developing economies could see a six percent shortfall compared to previous forecasts.
The World Bank advises that addressing these challenges requires countries to reduce tariffs and engage in comprehensive trade agreements, which could mitigate the adverse impacts and foster economic recovery. The report underscores an urgent need for policy measures to stabilize inflation and support economic stability, emphasizing the importance of liberalizing trade policies not only with the U.S. but also with other global partners. Other organizations, including the OECD and IMF, have echoed similar concerns, adjusting their growth forecasts downward in response to President Trump's tariff policies.
