World Bank Cuts 2025 Global GDP Growth Forecast to 2.3% Due to Trade Tensions

The World Bank has revised its 2025 global GDP growth forecast to 2.3%, marking the lowest level in five years. This downward revision reflects a significant shift in the global economic outlook, driven by a combination of rising trade tensions and mounting policy uncertainty. The bank's latest Global Economic Prospects report attributes this slowdown to the United States' decision to impose broad tariffs, which are weighing heavily on the outlook for global trade and investment.

The revised forecast of 2.3% for 2025 represents a 0.4 percentage point decrease from the previous projection of 2.7% made in January. This adjustment underscores the growing challenges faced by the global economy, as trade barriers and policy uncertainties continue to impede economic growth. The World Bank's report highlights that nearly 70% of all economies, including major players such as the United States, China, and Europe, as well as six emerging market regions, have seen their growth forecasts lowered from levels projected just six months ago.

Despite the global slowdown, some regions are expected to experience varying degrees of economic resilience. For instance, Bangladesh's growth projections remain unchanged at 3.3% for FY2024-25, 4.9% in FY26, and 5.7% in FY27. The World Bank attributes this stability to improved political conditions and the implementation of key reforms aimed at strengthening the business environment and boosting job creation. Investment, which had previously slowed, is forecast to revive under these favorable conditions. Resilient remittance inflows and easing inflation are anticipated to support stronger private consumption, although export growth is expected to remain subdued due to slower global growth and rising trade barriers.

The World Bank's report also notes that inflation is projected to moderate from FY2025-26, creating room for gradual monetary easing. On the fiscal side, Bangladesh is expected to see a decline in capital spending, though this will be counterbalanced by increases in current expenditures, including subsidies. The growth in FY25 is estimated to have slowed to 3.3%, owing to the adverse effects of political turmoil in 2024. Heightened uncertainty and increased input costs impeded private investment, while industrial output declined due to a slowdown in imports of capital goods.

The global economic outlook remains fraught with uncertainties, as trade tensions and policy uncertainties continue to cast a shadow over economic growth. The World Bank's revised forecast serves as a stark reminder of the challenges ahead, as policymakers and economists grapple with the complexities of a rapidly changing global economy. The downward revision in the 2025 global GDP growth forecast to 2.3% underscores the need for coordinated efforts to address trade barriers and policy uncertainties, in order to foster a more stable and resilient global economy.