WASHINGTON (AP) — The global economy is growing steadily in the face of war, protectionist trade policies and high interest rates. It is not growing fast enough to bring relief to the world's poorest people, the World Bank said on Thursday in its latest assessment of the global economy.
The bank expects the world economy to grow by 2.7% in 2025 and again in 2026. This performance is comparable to 2023 and 2024, but also lackluster. The growth rate was 0.4 percentage points lower than the 2010-2019 average. The recession reflects lingering damage from "adverse shocks in recent years," including COVID-19 and Russia's invasion of Ukraine.
The bank's latest Global Economic Outlook reports, released in January and June, do offer some good news. Global inflation, which exceeded 8% two years ago, is expected to slow to an average of 2.7% in 2025 and 2026, close to the targets of many central banks.
The World Bank consists of 189 member countries and aims to reduce poverty and improve living standards by providing grants and low-interest loans to poor economies.
For low- and middle-income countries, so-called developing economies, growth is expected to be 4.1% this year, slowing slightly to 4% in 2026. The World Bank says slow growth is "insufficient" to alleviate global poverty.
The World Bank notes that economic growth in developing countries has been decelerating for years—from a strong average of 5.9% per year in the 2000s, to 5.1% in the 2010s, to just 3.5% in the 2020s. With the exception of China and India, these countries lag behind the world's rich countries in per capita economic growth.
Their economies are hampered by sluggish investment, high debt levels, rising costs of climate change and growing protectionism that hurts exports. None of these things seem to be going away anytime soon. Indermit Gill, chief economist of the World Bank, said in the report: "For developing economies, the next 25 years will be more difficult than the past 25 years."
The world's poorest country - with annual per capita income below $1,145 - will grow by just 3.6% by 2024 "due to escalating conflict and violence in places like Gaza and Sudan".
"We have an all-out war in Europe, the Middle East and Africa," Gill told reporters ahead of the report's release. "Conflict is the worst economic killer." The World Bank predicts that economic growth in low-income countries will rebound to 5.7% this year and 5.9% in 2026, "depending" on the easing of conflicts in some places.
The World Bank upgraded its outlook for the United States, the world's largest economy. U.S. gross domestic product, the country's output of goods and services, is currently expected to grow 2.3% this year. That's down from 2.8% in 2024, but higher than the 1.8% forecast for this year in June. Despite high interest rates, the U.S. economy is still booming. U.S. economic growth has been fueled by strong consumer spending, an influx of immigrants that eased labor shortages, and rising productivity.
In contrast, Europe's expansion has been extremely slow. The World Bank lowered its GDP growth forecast for the 20 euro zone countries this year to 1% from 1.4% in June. The bank said consumer spending, business investment and manufacturing activity were "weak," partly reflecting the cost of high energy prices.
China's economic growth, the world's second largest economy, is expected to slow down from 4.9% last year to 4.5% in 2025 and 4% in 2026. China's property market has collapsed, demoralizing consumers and causing them to rein in spending. But China's exports and investment in factories and infrastructure have been strong.
At the same time, India has replaced China as the world's fastest-growing major economy, with growth expected to be 6.7% this year and next. In rural areas, a resurgence in agricultural production has boosted consumer spending - even as inflation and slow loan growth keep urban shoppers away.
The World Bank's forecast assumes no major changes in trade or budget policies.
But in the United States, President-elect Donald Trump is promising big things — cutting taxes, imposing steep tariffs on foreign goods, deporting millions of immigrants working in the country illegally. All of these policies could push up U.S. inflation and disrupt global trade. The outlook for U.S. economic policy "is unclear, and the impact on U.S. and global economic growth and inflation is clouded by uncertainty," the bank said.