WASHINGTON — The global economy is exhibiting steady growth despite facing significant challenges such as war, trade protectionism, and elevated interest rates. However, this growth is not sufficiently rapid to alleviate the struggles experienced by the world’s most impoverished populations, as highlighted in the latest economic assessment from the World Bank.
The institution projects a 2.7% expansion for the global economy in both 2025 and 2026. This projected growth mirrors the figures for 2023 and 2024 but remains disappointing when compared to a pre-pandemic average of 3.1% achieved between 2010 and 2019. The slower growth rate reflects ongoing repercussions from recent crises, including the COVID-19 pandemic and the conflict arising from Russia’s invasion of Ukraine.
The forthcoming Global Economic Prospects report, scheduled for release in January and June, provided a glimmer of hope with forecasts indicating a drop in global inflation rates. After experiencing rates above 8% two years ago, the outlook suggests an average of 2.7% inflation for both 2025 and 2026, aligning more closely with the targets set by many central banks.
With its membership of 189 nations, the World Bank is fundamentally dedicated to diminishing poverty and enhancing living standards via grants and low-interest loans aimed at poorer economies. For low- and middle-income countries—often referred to as developing economies—a growth rate of 4.1% is anticipated for this year, which will subsequently decrease slightly to 4% by 2026. Despite these projections, the World Bank has asserted that such growth is “insufficient” to effectively combat global poverty levels.
The institution has remarked on the long-term trends of declining growth in developing nations, which have seen a drop from an average of 5.9% annually in the 2000s to 5.1% in the 2010s, and down to just 3.5% in the current decade. Excluding major players like China and India, these nations are falling behind their wealthier counterparts in terms of per-capita economic growth.
Several factors contribute to these sluggish economies, including low investment, high debt burdens, the rising expenses associated with climate change, and a wave of protectionist policies that hinder their exports. Indermit Gill, the World Bank’s chief economist, commented that the next quarter-century may prove more challenging for these developing economies compared to the previous 25 years.
For the least developed countries, where annual per capita incomes fall below $1,145, an estimated growth rate of just 3.6% was recorded in 2024, primarily due to escalating violence and conflict in regions such as Gaza and Sudan. Gill emphasized the devastating impact of conflict on economic stability, noting that areas like Europe, the Middle East, and Africa are presently engulfed in wars that severely undermine economic growth. However, with an expected easing of conflict in certain regions, low-income countries may see growth rebound to 5.7% this year and 5.9% in 2026.
The World Bank has also adjusted its outlook for the United States, the largest economy globally, now anticipating a GDP growth of 2.3% for this year. This is a dip from the 2.8% projected for 2024 but an improvement from earlier estimates of 1.8% for the present year made in June. The American economy has shown resilience, propelled by robust consumer spending, a surge of immigrants easing labor shortages, and significant strides in productivity.
In contrast, the European economy is struggling with sluggish growth. The World Bank has revised its growth expectations for the 20 eurozone countries downward to 1% from a previous estimate of 1.4%, attributing this to weak consumer spending and business investment impacted by persistently high energy prices.
China’s economy, ranked second globally, is anticipated to slow down from a previous growth rate of 4.9% last year to 4.5% in 2025 and further to 4% in 2026. The downturn has been fueled by a crash in the real estate market, dampening consumer sentiment and spending. Nevertheless, China continues to maintain strong performance in exports and investments in infrastructure.
Meanwhile, India, which has overtaken China as the fastest-growing major economy, is projected to achieve a growth rate of 6.7% in both this and next year. Recovery in agriculture is boosting consumer spending in rural areas; however, high inflation and slow lending growth are tempering spending in urban centers.
The World Bank’s forecasts proceed with the assumption that there will be no significant changes to trade or budgetary policies. Nonetheless, President-elect Donald Trump has promised to implement bold strategies such as tax cuts, substantial tariffs on foreign goods, and mass deportation of undocumented immigrants. These potential changes may elevate U.S. inflation and disrupt global trade dynamics, leading the bank to label the future of U.S. economic policy as “unclear,” with consequent impacts on both U.S. and global growth outlooks clouded by uncertainty.
