London, UK – September 30, 2025

The World Bank has issued a stark warning to the global economy, slashing its 2025 growth forecast to a pace not seen outside of major recessions in over a decade.

World Bank Downgrades 2025 Global Growth Forecast dramatically, painting a sobering picture of an economy increasingly stifled by Rising Trade Barriers and Policy Uncertainty. The latest figures project a sharp deceleration, signaling a critical juncture for international commerce and development efforts worldwide.

In its most recent Global Economic Prospects report, the World Bank announced a significant downgrade, projecting that global GDP growth will slow to just 2.3% in 2025. This represents a cut of nearly half a percentage point from the bank’s previous January forecast and marks the slowest pace of non-recessionary global growth since the financial crisis of 2008. The report warns that this current trajectory could result in the weakest decade for global growth since the 1960s, a sobering assessment that carries profound implications for living standards, poverty reduction, and international development.

Headline Points on the Downgrade

 * Significant Revision: The global growth forecast for 2025 has been cut to 2.3%, a substantial downgrade from the previous January projection, reflecting a deterioration in the economic outlook across most regions.

 * Key Drivers: The primary reasons cited for the slowdown are a sharp rise in trade barriers—including the escalation of global tariff rates—and the pervasive effect of heightened policy uncertainty surrounding political and trade relations.

 * Widespread Impact: Growth forecasts have been cut in nearly 70% of all economies, spanning both advanced nations and emerging market and developing economies (EMDEs).

 * Debt and Poverty Risk: The slowing growth is expected to significantly impede developing economies in their ability to create jobs, reduce extreme poverty, and close the per capita income gap with richer nations.

 * Tepid Outlook: The World Bank expects only a tepid recovery in the following years, with global growth projected to average just 2.5% over the 2026-27 period, leaving output materially below earlier expectations.

Trade Barriers Choke Global Commerce

The principal source of the bank’s anxiety is the palpable rise in global trade fragmentation and protectionism. The report explicitly attributes the weakening outlook to the “substantial rise in trade barriers,” pointing to the effects of the recent and ongoing imposition of tariffs between major global powers, particularly the United States and its key trading partners. This trade friction has resulted in effective tariff rates reaching levels not seen in decades, which in turn has severely disrupted global supply chains and discouraged cross-border investment.

The ensuing policy uncertainty is compounding the problem. Unpredictable and swiftly changing governmental policies regarding trade, investment, and international cooperation have led to a palpable decline in business and consumer confidence globally. Companies are hesitant to commit to major capital expenditures or long-term growth strategies while the rules of international trade remain fluid and subject to sudden change.

The Burden on Developing Economies

While the overall growth downgrade was substantial for advanced economies—with the US economy, for instance, seeing its forecast growth for the year sharply reduced—the warning is particularly severe for the developing world. The World Bank forecasts that growth is expected to slow in nearly 60% of all developing economies this year, averaging just 3.8% in 2025. This pace is considered insufficient to sustain the robust job creation and poverty reduction required to meet development goals.

The combination of slower global demand, suppressed commodity prices, and elevated global uncertainty means that the progress of emerging markets and developing economies in closing per capita income gaps with advanced economies is anticipated to remain inadequate. Per capita income growth in these nations is projected to be 1.1 percentage points lower than the average seen between 2000 and 2019, signalling a potential reversal of hard-won economic gains.

World Bank Group chief economist Indermit Gill warned that without a swift course correction to stabilize the trade environment, the harm to living standards globally could be deep and prolonged. The report’s analysis suggests that resolving existing trade disputes and halving tariffs could boost global growth by 0.2 percentage points annually over the 2025-2026 period, emphasizing that political decisions on trade hold the key to the world’s economic future. The outlook remains dominated by downside risks, including potential further escalation of trade tensions, financial market adjustments, and intensifying geopolitical conflicts.