Global Economy Faces Uphill Battle Against Poverty
Despite steady growth, the global economy is struggling to make a meaningful impact on poverty levels, according to the World Bank’s latest assessment. The bank expects the world economy to expand by 2.7% in 2025 and 2026, a consistent but lackluster performance that falls short of the 2010-2019 average.
Lingering Damage from Recent Shocks
The sluggish growth is attributed to the lingering effects of COVID-19 and Russia’s invasion of Ukraine, which have had a lasting impact on the global economy. The World Bank notes that growth has been decelerating for years in developing economies, from a robust 5.9% average in the 2000s to just 3.5% in the 2020s.
Insufficient Growth to Ease Poverty
For low- and middle-income countries, growth is expected to come in at 4.1% this year and slow slightly to 4% in 2026. However, the World Bank says this pace of growth is insufficient to ease global poverty. In fact, the bank’s chief economist, Indermit Gill, warns that the next 25 years will be a tougher slog for developing economies than the last 25.
Conflict and Violence Hinder Growth
The world’s poorest countries, with per-person annual incomes below $1,145, grew just 3.6% in 2024 due to escalating conflict and violence in places like Gaza and Sudan. Conflicts are the worst economy killers, according to Gill. 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.
Regional Outlook
The World Bank has marked up the outlook for the United States, expecting U.S. gross domestic product to expand 2.3% this year. Europe, on the other hand, is expanding at an agonizingly slow pace, with the bank downgrading its GDP growth forecast to 1% this year. China’s economy is expected to decelerate, while India is expected to see a 6.7% expansion both this year and next.
Uncertainty Ahead
The World Bank’s forecasts assume no major shifts in trade or budget policies. However, the outlook for U.S. economic policy is unclear, with resulting impacts on U.S. and global growth and inflation clouded by uncertainty. The bank warns that policies such as tax cuts, tariffs, and deportations could drive up U.S. inflation and disrupt global trade.
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