• The World Bank projects global economic growth to slow to 2.3% in 2025, the lowest rate since the 2008 financial crisis
• Emerging-market and developing economies (EMDEs) are particularly vulnerable, facing increased risks of debt distress and declining demand
• The report emphasises the need for renewed global dialogue and cooperation to de-escalate trade tensions

Harare- The World Bank’s latest Global Economic Prospects report has painted a sobering picture of the global economy, projecting global growth to decelerate to 2.3% in 2025, the slowest pace since the 2008 financial crisis.

This forecast, nearly half a percentage point lower than earlier projections, reflects a confluence of heightened trade tensions, policy uncertainty, and widespread economic fragility.

With growth forecasts downgraded for nearly 70% of economies across all regions and income groups, the report reflects the pervasive nature of these challenges.

While a global recession is not anticipated, the World Bank warns that the first seven years of the 2020s are on track to record the slowest average growth of any decade since the 1960s.

This analysis explores the drivers of this slowdown, its implications, and potential pathways forward, drawing on the insights of M. Ayhan Kose, Chief Economist at the World Bank.

Drivers of the Slowdown

The primary catalysts for the projected economic deceleration are escalating trade tensions and policy uncertainty. Global trade, once a cornerstone of economic growth, has become a battleground, with rising trade barriers disrupting supply chains and eroding business confidence.

The U.S.-China trade conflict, alongside other regional trade disputes, has created a ripple effect, dampening investment and export-driven growth.

Protectionist policies, such as tariffs and export restrictions, have further strained international commerce, disproportionately affecting emerging-market and developing economies (EMDEs) that rely heavily on trade integration for growth.

Policy uncertainty exacerbates these challenges. Inconsistent monetary and fiscal policies, coupled with geopolitical instability, have clouded economic outlooks.

Central banks in advanced economies, grappling with inflation and sluggish growth, face a delicate balancing act.

Tightening monetary policy to curb inflation risks stifling growth, while premature loosening could reignite price pressures.

Meanwhile, fiscal space in many EMDEs remains constrained, limiting their ability to implement countercyclical measures. Political polarisation and upcoming elections in key economies further amplify uncertainty, deterring long-term investments.

Broad-Based Impact

The World Bank’s report highlights the indiscriminate impact of these headwinds, with growth forecasts slashed across all regions and income groups. Advanced economies, such as the United States and the Eurozone, face subdued growth due to high interest rates, weakening consumer demand, and trade disruptions.

In EMDEs, the outlook is even grimmer. These economies, which once benefited from globalisation, now bear the brunt of trade conflicts. Commodity exporters, such as those in Sub-Saharan Africa, are particularly vulnerable to declining global demand and volatile prices.

Meanwhile, import-dependent nations struggle with rising costs and supply chain bottlenecks.

The report’s projection of 2.3% global growth in 2025 masks significant regional disparities.

For instance, South Asia may outperform other regions, driven by India’s relatively resilient economy, while Latin America and Sub-Saharan Africa lag due to structural weaknesses and external shocks.

Across income groups, low-income countries face heightened risks of debt distress, with limited access to international financing compounding their challenges.

There is the need for proactive measures to mitigate these risks. For EMDEs, redoubling efforts toward trade integration with new partners is critical. Regional trade agreements, such as the African Continental Free Trade Area (AfCFTA), offer opportunities to diversify markets and reduce reliance on traditional trading partners.

Simultaneously, pro-growth reforms such as improving governance, investing in infrastructure, and enhancing labor market flexibility can boost domestic resilience. Strengthening fiscal buffers is also essential to navigate external shocks, particularly for debt-distressed economies.

At the global level, Kose advocates for renewed dialogue and cooperation. Multilateral institutions, such as the World Trade Organization, can play a pivotal role in de-escalating trade tensions and promoting rules-based commerce.

Coordinated policy responses, including debt relief for low-income countries and climate-focused investments, could further stabilise the global economy. However, achieving such cooperation in a fragmented geopolitical landscape remains a formidable challenge.

Therefore, the World Bank’s Global Economic Prospects report serves as a reminder of the fragility of the global economy. Heightened trade tensions and policy uncertainty have cast a long shadow, driving growth to its slowest pace since 2008. While a recession may be avoided, the prospect of a lost decade looms large, with profound implications for global prosperity.

EMDEs, in particular, face an uphill battle, but strategic reforms and regional integration offer a lifeline. Ultimately, the path to stability lies in renewed global cooperation, a tall order in an era of division, but one that remains essential for charting a more resilient and prosperous future.

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