Global Growth to Slow Sharply Amid Trade Disruptions

Uncertainty triggered by sweeping US tariffs and trade fragmentation is forecast to slow global economic growth to 2.3% this year, the lowest non-recessionary rate in nearly two decades, according to the World Bank's latest economic outlook. The multilateral lender cited a weakening trade environment and deteriorating investor sentiment as key factors behind the downgrade. Meanwhile, India's economic growth projection was pegged at 6.3% for 2025-26, the fastest among major economies, but still lower than the January forecast.

Key Takeaways:

• The World Bank cut its 2025 global GDP growth forecast to 2.3%, down from 2.7% estimated in January, citing a weakening trade environment and deteriorating investor sentiment.
• The forecast marks the slowest pace of non-recessionary expansion in nearly two decades, with 17 years being the weakest performance outside of outright global recessions.
• The World Bank attributed high levels of policy uncertainty, driven by US President Donald Trump's aggressive tariff regime, to dragging down both growth and inflation expectations.
• The trade war with China has paused, but prospects for a durable truce remain unclear.
• Developing economies face slower recovery, with roughly 60% of developing nations being commodity exporters and grappling with a "very nasty combination" of falling prices and unpredictable global demand.
• The bank projects global growth to average just 2.5% for the remainder of the decade through 2029, making it the slowest ten-year growth rate since the 1960s.
• Per capita GDP of high-income countries is expected to return to its pre-pandemic trajectory by 2027, but for developing nations (excluding China), per capita output is projected to be 6% below pre-Covid forecasts, potentially taking two decades to recoup the economic losses of the 2020s.
• The World Bank urged G20 economies to avoid trade fragmentation and suggested developing nations reduce tariffs across the board and harmonize cross-border rules to drive sustainable growth.

Statistics:

• Global GDP growth forecast for 2025: 2.3%
• Global GDP growth forecast for 2025-26: 6.3% (India)
• Growth rate for the remainder of the decade (2029): 2.5%
• Per capita GDP of high-income countries in 2027: expected to return to pre-pandemic trajectory
• Per capita output of developing nations (excluding China) in 2025: 6% below pre-Covid forecasts
• Duration for developing nations to recoup economic losses: approximately 20 years

Sources:

• World Bank economic outlook, released on Tuesday
• Indermit Gill, chief economist of the World Bank Group
• Times of India (TOI) Business Desk Global growth will slow sharply this year as trade disruptions triggered by sweeping US tariffs increase uncertainty and fragment markets, the World Bank warned in its latest economic outlook released Tuesday.
• OECD: 2025 global growth projection lowered from 3.1% to 2.9%
• IMF: 2025 global growth forecast lowered from 3.3% to 2.8%