As of February 13, 2025, the world economy appears headed for a modest recovery and thus stabling at the level of 2.7% for 2025-2026. It is in no way close to the average of 3.1% that prevailed between 2010 and 2019, before the COVID-19 pandemic.Under the same way the World Bank refers to it as a growth slowdown because the numerous negative shocks, such as the COVID-19 impacts and geopolitical conflicts casting shadows on economic activities, have been hitting one after the other.
The inflation trend is starting to drop from above 8% two years ago to 2.7% in 2025 and 2026. Falling prices ease the burden on the consumer, making a huge impact on the monetary policies adopted by central banks to keep inflation at bay.
On emerging economies it is easy to deny this because the anticipated growth rates of 4.1% in 2025 and 4.0% in 2026 do not amount to any radical solutions to eliminate poverty levels. Weak investment, crippling public debt, rising living costs due to climate change, and trade protectionism have cumulatively depressed its growth. According to the World Bank Chief Economist Indermit Gill, developing countries can get ready for harsh conditions in the next years than they faced in the previous two decades.
On the side of developed economies, though with a little more optimism from outcomes of 2.3% for US growth in 2025, rather prevailing extremely high interest rates. Quote: “Forecasted on eurozone,” now a certain cultural milestone, “to 1% may be only due to weakened growth in household.
Irrespective of averting recession through diverging monetary tightening that guided down inflation, sluggish growth is in sight, warns the IMF. Threats to longer-term economic and social well-being include, among others, structural obstacles including an aging population, weak investment-and therefore low productivity growth. Besides, the speed of rising protectionism and rising public debt are identified as future threats to sustained growth.
Climate change looms large with central banks warning that direct shocks on the world economy caused by environmental degradation might cut global economic growth down by a third. New climate models, which factored in the effects of both floods and droughts with rising temperatures, led to predictions that the potential economic risk posed by climate change would be worse off than earlier estimates.
Put very briefly, the should-be relaxed growth of the global economy is neither helping poverty alleviation, combating climate change, nor eliminating economic structural weaknesses. Reforms that improve productivity, boost investment, and thus support sustainable development have to be put in place, adhering, to find credible solutions to those challenges.
