World Bank Cuts 2025 Global Growth Forecast to 2.3%, Warns of “Turbulence” from Trade Wars

Photo: The Economic Times

In its June 10, 2025 Global Economic Prospects report, the World Bank sharply revised down its global GDP growth forecast for 2025 to 2.3%, a notable drop from its January estimate of 2.7%. This marked revision comes amid growing protectionist sentiment and heightened tariff escalation, primarily linked to persistent trade tensions between the U.S. and other major economies.

What’s Driving the Downgrade?
According to Chief Economist Indermit Gill, a "substantial rise in trade barriers" and intense "policy uncertainty" have disrupted the trajectory toward a soft economic landing—slowing inflation without triggering a recession. The bank describes the current global context as “running into turbulence,” warning that, without swift corrective action, the repercussions on living standards could be “deep”.

Regional Outlook—Where Are We Headed?

United States: Growth is expected to halve to 1.4%—a sharp decline from the 2.8% recorded in 2024 and previously forecasted at 2.3% for 2025.

China: Expansion is projected to slow to 4.5%, weighed down by trade barriers, real estate challenges, and demographic shifts.

Eurozone: Facing sluggish domestic demand and disrupted export channels, regional growth is anticipated at a meager 0.7%, down from 0.9% in 2024 .

India: Remains the world’s fastest-growing major economy at 6.3%, though slightly shy of the 6.5% forecasted in January.

Japan: Projected to hit 0.7% growth this year—an improvement over 2024’s 0.2%, but well below prior expectations .

Freight & Inflation: Twin Pressures
Global trade is forecast to increase just 1.8% in 2025—dramatically below the 3.4% rate seen in 2024—as tariffs and fragmented trade routes suppress cross-border flow. This reluctance to trade also drives cost-push inflation, leaving global inflation elevated at around 2.9%, above pre-pandemic norms .

Worst Decade Since the ’60s?
The World Bank warns that if current trends persist, the 2020s may mark the weakest growth decade—outside of recession years—since the 1960s. While not signaling an immediate global recession (risks remain under 10%), prolonged stagnation could inflict irreversible damage, particularly across emerging economies .

What’s the Prescription?
The report calls for urgent trade de-escalation—including reducing tariffs and regulatory friction—and robust fiscal and monetary coordination. It highlights the Group of 20 as key agents of change, urging a collective rollback of trade barriers to preserve global economic health