World Bank Forecasts Weakest Long-Term Growth Outlook for Developing Economies Since 2000
The global economy is expected to stabilize over the next two years, but developing nations face significant challenges, according to the World Bank’s latest report on global economic prospects. The report, released on Tuesday, warns that developing economies, which account for 60% of global growth, are projected to experience the weakest long-term growth outlook since the beginning of the 21st century.
Global economic growth is expected to expand by 2.7% in 2025 and 2026, maintaining the same pace as in 2024, driven by a gradual decline in inflation and interest rates. However, growth in developing economies is projected to remain steady at around 4%, which is slower than the pre-pandemic pace and insufficient to meet poverty reduction and broader development goals.
This assessment marks the first time the World Bank has systematically analyzed the long-term performance of developing economies since 2000. It reveals that while developing economies grew rapidly during the early 2000s, their growth slowed after the 2008-09 global financial crisis. Economic integration, once a driving force, has faltered in recent years, with foreign direct investment (FDI) flows into developing nations halving compared to the early 2000s. In 2024, new global trade restrictions surged to five times the average of the previous decade.
“The next 25 years will be a tougher slog for developing economies than the last 25,” said Indermit Gill, the World Bank Group’s Chief Economist. “Most of the forces that once aided their rise have dissipated, replaced by daunting challenges such as high debt, weak investment, low productivity growth, and the escalating costs of climate change.”
The report highlights that developing economies now play a much larger role in the global economy than they did at the start of the century. These nations now contribute approximately 45% of global GDP, up from 25% in 2000. Their economic interdependence has also increased, with more than 40% of their exports now going to other developing countries, double the share in 2000. Additionally, between 2019 and 2023, developing economies accounted for 40% of global remittances, up from 30% in the previous decade.
While the economic fortunes of developing nations are increasingly intertwined, growth in these economies still depends heavily on the performance of major advanced economies, such as the United States, the euro area, and Japan. For instance, a 1 percentage point increase in GDP growth in China, India, and Brazil can boost GDP in other developing economies by nearly 2% after three years.
M. Ayhan Kose, the World Bank’s Deputy Chief Economist, emphasized the importance of new policies for developing nations. “In a world shaped by policy uncertainty and trade tensions, developing economies will need bold, far-reaching policies to unlock opportunities for cross-border cooperation,” Kose said. He suggested that expanding trade and investment partnerships with other developing nations, modernizing infrastructure, and adopting sound macroeconomic policies would be key to boosting growth.
Despite the challenges, the World Bank’s report notes that there are opportunities for growth. By addressing infrastructure deficits, accelerating the transition to a green economy, and improving education and healthcare, developing economies can improve their growth prospects while also meeting climate and development goals. The report stresses that multilateral cooperation will be essential to strengthening global trade governance and navigating the uncertainties of the global economy.
The next two years could still bring volatility for developing nations, with rising global policy uncertainty and persistent inflation threatening to dampen investor confidence. However, there is also potential for stronger-than-expected growth, particularly if stimulus measures in China or robust consumer spending in the United States provide a boost.
As the global economy stabilizes, developing economies will face a prolonged and challenging path to recovery, requiring new strategies and international collaboration to overcome the complex headwinds they face.
