Trade tension drags global growth to 17-yr low, says World Bank

The World Bank has cut nearly half a percentage point from its forecast on global growth at the start of the year, due to escalating trade tension and policy uncertainty. The new growth figures marks the slowest pace since 2008.

The Washington-based lender slashed its 2025 outlook to 2.3 percent, from 2.7 percent projected in January – the weakest in 17 years, outside of the recessions in 2009 and 2020 created by the shocks of the global financial crisis and Covid-19 pandemic.

“The world economy today is once more running into turbulence. Without a swift course correction, the harm to living standards could be deep,” Indermit Gill, the World Bank’s chief economist, wrote in a foreword to the report released on Tuesday.

“International discord — about trade, in particular — has upended many of the policy certainties that helped shrink extreme poverty and expand prosperity after the end of World War II.”

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The World Bank also warned — based on its current forecasts — that global growth in the first seven years of this decade is on course to average 2.5 percent, the slowest for any decade since the 1960s.

President Donald Trump’s return to the White House this year has seen a lot of shake up in global trade that’s fuelled uncertainty and disrupted the earlier positive forecast for the world’s economies.

The uncertainty and volatility of the White House sweeping tariffs have shocked markets, paralysed investments and disrupted supply chains.

According to Gill, the poorest countries will suffer the most as per capita GDP levels will be 6 percent lower except for China. The economist noted that with this forecast, it could take about two decades for EMDEs to recoup the economic losses of the 2020s.

The multilateral lender sees growth in Sub-Saharan Africa (SSA) edge up from 3.5 percent in 2024 to 3.7 percent this year and then average 4.2 percent in 2026-27.

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Despite the seeming rise in growth, it is anticipated to be weaker than previously expected, owing to the deterioration in the external environment and domestic headwinds.

“Per capita income gains will remain inadequate to make significant progress in reducing extreme poverty in the region, which is home to most of the world’s poor,” the World Bank stated.

“Progress in these areas is likely to be impeded by the looming jobs challenge, which is expected to be the most acute in SSA relative to other regions, as the pace of job creation struggles to match the rapid expansion of working-age populations.”

For Nigeria, growth is forecast to strengthen to 3.6 percent in 2025 and to an average of 3.8 percent in 2026-27, buoyed by services and the financial sector as domestic reforms continue to spur investment.

“Services activity will continue to be the main driver of growth, while the industrial sector will remain constrained by subdued crude oil production as last year’s slight rebound wanes.”