World Bank Expects Global Growth Outlook At 2.3 Pct In 2025, Slowest Since 2008

KUALA LUMPUR, June 11 (Bernama) -- Global growth is expected to weaken to 2.3 per cent in 2025, with deceleration in most economies relative to last year.

According to the World Bank Group, this marks the slowest rate of growth since 2008, aside from outright global recessions.

In its latest Global Economic Prospects for June 2025, it said the revised global growth, which was previously projected at 2.7 per cent in January 2025, is principally driven by advanced economies, amid the impact of higher trade barriers, elevated uncertainty, increased financial volatility, and weakened confidence.

"Progress by emerging market and developing economies (EMDEs) in closing per capita income gaps with advanced economies and reducing extreme poverty is anticipated to remain insufficient.

"Thereafter, growth is forecast to firm to about 2.5 per cent over 2026-2027, as trade flows continue adjusting to higher tariffs to the point that global trade edges up, while policy uncertainty moderates from record-high levels," it said, adding that the outlook largely hinges on the evolution of trade policy globally.

According to the World Bank, global 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.

"Other downside risks include weaker-than-expected growth in major economies with adverse global spillovers, worsening conflicts, and extreme weather events.

"On the upside, uncertainty and trade barriers could diminish if major economies reach lasting agreements that address trade tensions," the report noted.

The ongoing global headwinds underscore the need for determined multilateral policy efforts to foster a more predictable and transparent environment for resolving trade tensions, some of which stem from macroeconomic imbalances, it said.

The World Bank said global policy efforts are also needed to address the deteriorating circumstances of vulnerable EMDEs amid prevalent conflict and debt distress, while addressing long-standing challenges, including the effects of climate change.

"National policy makers need to contain risks related to inflation as well as strengthen their fiscal positions by raising additional domestic revenues and reprioritising spending.

"To facilitate job creation and boost long-term growth prospects in EMDEs, reforms are essential to enhance institutional quality, stimulate private investment growth, develop human capital, and improve labour market functioning," it said.

The World Bank said the outlook for global inflation has become more uncertain since last year due to a combination of shocking events, while continued tightness in labour markets has kept core inflation at a somewhat elevated level in many economies.

It noted that global headline consumer price inflation has remained elevated above pre-pandemic norms over the past year, briefly edging higher in some advanced economies in early 2025.

"In EMDEs, monthly headline inflation readings were volatile earlier this year, with a pickup in core inflation partly reflecting rising services prices and wage pressures," it said.

-- BERNAMA