Global economic growth is expected to remain steady this year and next, though at historically low levels, the World Bank reported Thursday, voicing particular concern over developing nations that face their weakest long-term outlook since 2000.
The world economy is seen expanding 2.7% in 2025 and again in 2026, the bank said in its latest Global Economics Prospects, as inflation and interest rates "decline gradually." It's a remarkably consistent performance – matching 2023 and 2024 – but also a lackluster one.
Growth is running 0.4 percentage points below the 2010-2019 average. The slump reflects lingering damage from the "adverse shocks of recent years," including COVID-19 and Russia’s invasion of Ukraine.
Still, the economy is growing steadily in the face of war, protectionist trade policies and high interest rates. It just isn't growing fast enough to bring relief to the world's poorest, according to the World Bank.
The report, which comes out in January and June, did offer some good news. Global inflation, which was running over 8% two years ago, is expected to slow to an average of 2.7% in 2025 and 2026, close to many central bank targets.
The World Bank, comprising 189 member nations, seeks to reduce poverty and boost living standards by providing grants and low-rate loans to poor economies.
For low- and middle-income countries – so-called developing economies – growth is expected to come in at 4.1% this year and slow slightly to 4% in 2026, a weaker performance than before the COVID-19 pandemic.
Growth at this level would be "insufficient to foster the progress necessary to alleviate poverty and achieve wider development goals," the bank said.
In Türkiye, the delayed effects of tight monetary policy are expected to put pressure on economic growth in 2025, but these effects are anticipated to diminish by 2026, the bank said.
It lowered its growth estimate for the Turkish economy to 2.6% from 3.6%, while also cutting the 2026 expectation from 4.3% to 3.8%.
Türkiye's annual average inflation is estimated to decrease by 42 points compared to 2024, reaching 15.9% in 2026, according to the lender. It ended 2024 at a lower-than-expected 44.4%, and the country's central bank sees it ending 2025 at about 21%.
The World Bank also noted improvements in Türkiye's external imbalances, a significant narrowing of the current account deficit, an increase in international reserves, and a decline in risk premiums, all contributing to a marked reduction in the yield spread on government bonds.
The World Bank noted that growth has been decelerating for years in the developing world – from a robust average of 5.9% a year in the 2000s to 5.1% in the 2010s to just 3.5% in the 2020s. Excluding China and India, those countries are lagging behind the world's wealthy countries in per-capita economic growth.
Their economies have been hobbled by sluggish investment, high levels of debt, the increasing costs of climate change and growing protectionism that hurts their exports. None of those things seems likely to go away anytime soon.
"The next 25 years will be a tougher slog for developing economies than the last 25," World Bank chief economist Indermit Gill said in the report, urging countries to adopt domestic reforms to encourage investment and deepen trade relations.
The bank said the gap between rich and poor countries was widening, with average per capita growth rates in developing countries, excluding China and India, averaging half a percentage point below those in wealth economies since 2014.
"Over the next two years, developing economies could face serious headwinds," the World Bank report said.
The world's poorest countries – with per-person annual incomes below $1,145 – grew just 3.6% in 2024 "on account of escalating conflict and violence" in places like Gaza and Sudan.
"We have all-out war in Europe, in the Middle East and in Africa," Gill told reporters ahead of the report’s release. "Conflicts are the worst economy killers."
The bank expects low-income countries' growth to rebound to 5.7% this year and 5.9% in 2026, "contingent" on the easing of conflict in some places.
The World Bank marked up the outlook for the United States, the world's largest economy. It now expects the U.S. gross domestic product – the nation's output of goods and services – to expand by 2.3% this year. That is down from 2.8% in 2024 but up from the 1.8% the bank forecast for this year back in June.
The American economy has managed to thrive despite high interest rates. U.S. growth has been boosted by strong consumer spending, an influx of immigrants who eased labor shortages and improvements in productivity.
Europe, by contrast, is expanding at an agonizingly slow pace. The World Bank downgraded its GDP growth forecast for the 20 countries that share the euro currency to 1% this year from the 1.4% it had projected in June.
The bank cited "anemic" consumer spending, business investment and manufacturing activity, partly reflecting the cost of high energy prices.
The Chinese economy, the world's second-biggest, is expected to decelerate – from 4.9% growth last year to 4.5% in 2025 and 4% in 2026. China's real estate market has crashed, demoralizing consumers and causing them to rein in their spending. But Chinese exports and investment in factories and infrastructure have been sturdy.
Meanwhile, India, which has supplanted China as the world's fastest-growing major economy, is expected to see a 6.7% expansion both this year and next. In rural areas, a recovery in farm production has boosted consumer spending – though inflation and slow lending growth have discouraged shoppers in cities.
The World Bank's forecasts assume no major shifts in trade or budget policies.
But in the United States, President-elect Donald Trump is promising big things – slashing taxes, slapping hefty tariffs on foreign goods, deporting millions of immigrants who are working in the country illegally. All those policies could drive up U.S. inflation and disrupt global trade.
Trump, who takes office Monday, has proposed a 10% tariff on global imports, a 25% punitive duty on imports from Canada and Mexico until they clamp down on drugs and migrants crossing borders into the U.S., and a 60% tariff on Chinese goods. Some countries including Canada have already vowed to retaliate.
The World Bank warned that U.S. across-the-board tariffs could reduce global economic growth by 0.3 percentage points if America's trading partners retaliate with tariffs of their own.
It said simulations using a global macroeconomic model showed a 10-percentage point increase in U.S. tariffs on all trading partners in 2025 would reduce global growth by 0.2 percentage points for the year, and proportional retaliation by other countries could worsen the hit to growth.
It said those estimates were consistent with outside studies which showed a 10-point increase in U.S. tariffs could "reduce the level of U.S. GDP by 0.4%, while retaliation from trading partners would increase the total negative impact to 0.9%."
But it noted that U.S. growth could also increase by 0.4 percentage points in 2026 if U.S. tax cuts were extended, it said, with only small global spillovers.
The bank still said that the outlook for U.S. economic policy is "unclear, with resulting impacts on U.S. and global growth and inflation clouded by uncertainty."
