US tariffs could lead to the slowest global economic growth since 2008, with no global recession expected, the World Bank's June World Economic Outlook report said.
“Increasing trade tensions and economic policy uncertainty could lead to a slowdown in global economic growth this year to the lowest level since 2008, except during periods of full-blown global recessions.“ “As a result of these headwinds, growth forecasts for nearly 70% of all economies – across all regions and income groups – have been revised downwards“, the report's authors note.
They forecast that global growth will slow to 2.3% in 2025, “nearly half a percentage point below the level forecast at the beginning of the year“. “A global recession is not expected. However, if the forecasts for the next two years come true, the average growth rate of the world economy in the first seven years of the 2020s will be the lowest of any decade since the 1960s“, the report highlights.
According to the World Bank's Chief Economist and Senior Vice President for Economic Development, Indermit Gill, “development progress in developing countries outside Asia has stalled“. “And this trend has continued for more than a decade. Growth rates in developing economies have been steadily declining over the past three decades, from 6% per year in the 2000s to 5% in the 2010s and less than 4% in the 2020s. This reflects the dynamics of world trade growth, which has slowed from an average of 5% in the 2000s to around 4.5% in the 2010s and less than 3% in the 2020s. In addition, investment growth has slowed, while debt has increased to record levels,“he added.
In 2025, economic growth is expected to slow in almost 60% of developing economies. “Average annual growth in developing countries will be 3.8% before increasing slightly to 3.9% in 2026 and 2027. That's more than 1 percentage point below the 2010s average. In low-income countries, growth is expected to be 5.3% this year, 0.4 percentage points below the forecast made at the beginning of 2025. In addition, rising tariffs and labor market tensions are fueling global inflation, which is still above pre-pandemic levels and is expected to average 2.9% in 2025,“ the report's authors said.
According to experts, per capita income growth in developing countries will be 2.9% in 2025, which is 1.1 percentage points below the average for the period from 2000 to 2019. “Assuming that emerging economies, excluding China, can maintain overall GDP growth at 4% (the rate projected for 2027), it will take them about two decades to return to their pre-pandemic growth trajectory“, the authors of the work note.
At the same time, according to them, the pace of global economic growth could recover faster than expected, “if the largest economies manage to reduce trade tensions, which will lead to a reduction in overall economic policy uncertainty and financial instability“.