World Bank cuts global growth forecasts on trade barriers, policy uncertainty

Customers shop at a Walmart store in Los Angeles County, California, the United States, May 20, 2025. [Photo/Xinhua]

The World Bank slashed global economic growth forecasts on Tuesday citing heightened trade tensions and policy uncertainty.

The turmoil resulted in lower growth forecasts in nearly 70 percent of all economies across all regions and income groups, according to the latest bi-annual Global Economic Prospects report issued on Tuesday.

The report cut the 2025 global economic growth forecast to 2.3 percent from 2.7 percent in January, 2025 with the 2026 growth forecast lowered to 2.4 percent from 2.7 percent.

Advanced economies are expected to see an expansion of 1.2 percent in 2025, down from 1.7 percent in earlier forecasts while the growth forecast with emerging market and developing economies was lowered by 0.3 percentage points to 3.8 percent in 2025.

In particular, the United States is expected to grow by 1.4 percent in 2025, 0.9 percentage points less than previous forecast and only half of the 2.8 percent growth in 2024.

Both the Euro Area and Japan are expected to grow 0.7 percent this year, 0.3 percentage points and 0.5 percentage points lower from previous estimates, respectively, while China's growth forecasts for both 2025 and 2026 remain unchanged.

The world economy is once more running into turbulence while a "soft landing" appeared to be in sight only six months ago, said the report.

"Without a swift course correction, the harm to living standards could be deep," warned the report.

"Outside of Asia, the developing world is becoming a development-free zone," said Indermit Gill, the World Bank Group's Chief Economist and Senior Vice President for Development Economics.

Gill highlighted slower economic and investment growth in developing economies in comparison with recording-making debt levels.

Progress by emerging market and developing economies in closing per capita income gaps with advanced economies and reducing extreme poverty is anticipated to remain insufficient and the outlook largely hinges on the evolution of trade policy globally, said the report.

The global economy is expected to see a tepid recovery in 2026 and 2027 but world output would remain materially below projections made in January, 2025.

However, growth could turn out to be lower if trade restrictions escalate or if policy uncertainty persists, which could also result in a build-up of financial stress, according to the report.