World Bank lowers global growth forecast to 2.3%, keeps India’s growth rate at 6.3%

Rising trade and non-trade barriers and policy uncertainties are negatively impacting global economic growth, which is expected to decelerate to levels around 2.3 per cent in 2025, the slowest rate of growth since 2008, according to a World Bank report.

The World Bank has revised its global economic growth projections to 2.4 per cent in 2026 and 2.6 per cent in 2027.

The latest issue of World Bank’s Global Economic Prospects report expects the global economy to overcome the recessionay phase in 2026-27, with a tepid recovery.

The slowing growth rate will also negate the prospects of emerging market and developing economies in closing income gaps with advanced economies and reducing extreme poverty. 

Despite global uncertainties. the report projects India's FY26 growth at 6.3 per cent, unchanged from the April projection, but lower compared to its January forecast of 6.7 per cent.

The report projects India’s economic growth to be slightly faster at 6.5 per cent in FY27 and 6.7 per cent in FY28.

In April, the International Monetary Fund (IMF) cut India's FY26 growth forecast to 6.2 per cent from its earlier projection of 6.5 per cent after US President Donald Trump announced a 27 per cent tariff of imports from India, citing India’s 52 per cent duty on US imports.

Trump, however, temporarily reduced the tariff to 10 per cent on 2 April, providing relief to India and other trading partners.

The report projects growth to slow in East Asia and Pacific and Central Asia – regions that are more reliant on trade - and to a lesser extent in South Asia. 

Growth in Latin America and the Caribbean is projected to be the lowest among all emerging market and developing economies, mainly because of the innate structural weaknesses and the new trade barriers. 

The Middle East, North Africa and Sub-Saharan Africa regions are expected to face drags in growth due to weakening outlook for commodities. 

Besides trade policies, the global economy faces headwinds arising from geopolitical conflicts and escalating wars.

Any lasting agreement on trade policy among major economies could offset the slowdown in global economic growth, says the report.

While growth could improve if nations reach a consensus on trade policies, the World Bank also sees a downside risk of persisting policy uncertainties. This, according to the report, could lead to increased financial stress and a further slowing of major economies, and resultant spill-overs.