The World Bank's latest Global Economic Prospects report warns that global growth is expected to slow to 2.3% in 2025, the lowest pace since 2008, primarily due to heightened trade tensions and policy uncertainty.

While a global recession is not forecasted, the average growth for the first seven years of this decade could be the slowest since the 1960s, with global GDP growth projected to average just 2.5% in the 2020s.

Emerging market and developing economies (EMDE) are facing significant challenges, with expected growth dropping to 3.8% in 2025, far below pre-pandemic averages and insufficient to meet job creation needs.

Governments in developing economies must address high fiscal deficits, which have averaged nearly 6% of GDP during the 2020s, a significant increase since the previous century.

Despite the uncertain impact of tariffs on the US economy, the labor market added 139,000 jobs in May, although consumer and small business anxiety remains high.

World Bank Chief Economist Indermit Gill and Deputy Chief Economist M. Ayhan Kose indicate that tariffs could reduce expected GDP growth by nearly half a percentage point this year.

Regional growth projections for 2025 show varied expectations, with East Asia and Pacific at 4.5%, South Asia at 5.8%, and Europe and Central Asia at 2.4%.

The report warns that slow growth will hinder efforts in developing economies to create jobs, reduce extreme poverty, and close income gaps with advanced economies.

The World Bank suggests that resolving trade disputes and reducing tariffs could potentially boost global growth by 0.2 percentage points in 2025 and 2026.

Cutting tariffs by half from May 2025 levels could increase global GDP by 0.2% this year and next, highlighting the importance of trade relations.

Indermit Gill noted that growth in developing economies has decreased from 6% annually in the 2000s to less than 4% in the 2020s, amid increasing debt levels.

The euro area is projected to experience even worse conditions, with growth slowing to 0.5% in 2025 due to prolonged uncertainty and financial volatility.