World Bank says global economy "running into turbulence"
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World Bank and International Monetary Fund signage during the groups' annual meetings last year. Photo: Kent Nishimura/Bloomberg via Getty Images
The World Bank estimates the global economy is on track for the slowest growth of any non-recessionary year since 2008, according to forecasts released on Tuesday.
Why it matters: The group says tariff policies and the associated economic uncertainty crushed prospects of a "soft landing" that looked possible just months ago.
What they're saying: "The global economy was stabilizing after an extraordinary string of calamities both natural and man-made over the past few years. That moment has passed," Indermitt Gill, chief economist at the World Bank, wrote in a report.
- "The world economy today is once more running into turbulence."
By the numbers: The World Bank projects that global growth will weaken to 2.3% this year, the slowest pace in 17 years, aside from outright recessions in 2008 and 2020.
- The forecast is 0.4 percentage point lower than its January estimate, a downgrade driven by gloomier expectations for the U.S. and other large economies.
- The World Bank estimates that the U.S. will grow by 1.4% this year, nearly a full percentage point below its expectation at the start of the year.
The big picture: The World Bank is the latest global institution — alongside the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) — to anticipate that Trump's trade policies will slam the brakes on growth.
- Its outlook assumes that tariff levels in late May — including the lower tariff rates on Chinese goods negotiated last month — stick in the years ahead.
- The World Bank anticipates a "tepid recovery" over the next two years that leaves "global output materially below" that anticipated just months ago.
- If tariff levels are halved from late May, it would add 0.2 percentage point to global growth, on average, between 2025 and 2026.
What to watch: The World Bank estimates global trade growth will slow to 1.8%, well below the 3.4% growth rate in 2024.
- Its projections say global growth won't recover to pre-pandemic norms in the years ahead, suggesting permanent damage to trade flows.
- Trade growth will reach 2.7% in 2027, well-below the pre-pandemic average of 4.6% in the 2010s.
The bottom line: The World Bank sees the slowdown in global trade as only the latest threat to a world economy grappling with high debt levels, geopolitical strife and the end of rock-bottom interest rates.
- "Many of the forces behind the great economic miracle of the last 50 years ... have swung into reverse," Gill writes in the report.
- "Conditions that may have facilitated relatively painless policy corrections have come and gone — the record-low interest rates that prevailed in the first two decades of this century, for example, are now a thing of the past," Gill adds.
