The World Bank (WB) has projected the global growth rate for this year to be 2.3%, a 0.4 percentage point decrease from the previous forecast. It sharply revised downwards after six months, citing heightened trade tensions due to tariff impositions by the Trump administration and increased financial volatility. If WB's prediction materializes, the global growth rate will hit its lowest since 2008.
On the 10th (local time), WB released the Global Economic Prospects report which primarily includes this information. WB calculates these growth rates twice a year in January and June using its own analysis method based on market exchange rates. At this time, Korea's economic outlook is not included separately.
According to the report, the WB estimates the global economy will grow by 2.3% this year. This is a gloomier outlook than January's 2.7%, and if realized, it would be the lowest since the 2008 financial crisis. The growth rate for next year was also forecast at 2.4%, 0.3 percentage points lower than January. WB cited trade tensions and their resulting uncertainties, as well as increased financial volatility, as reasons for the downward revisions.
The growth rate for developed countries this year is projected to be 1.2%, a 0.5 percentage point decrease from the January forecast. Particularly, the United States saw a significant adjustment from 2.3% to 1.4%. During the same period, the U.S. forecast for next year was lowered from 2.0% to 1.6%. Economic uncertainty due to tariff policies led to weakened domestic and international consumption and investment sentiment.
The eurozone, with its high degree of trade openness, is also projected at 0.7%, 0.3 percentage points lower than the January forecast due to trade barriers. The eurozone's growth forecast for next year decreased from 1.2% in January to 0.8% this month.
Japan is expected to show a higher growth rate than last year's 0.2% due to the resumption of automobile factories and a recovery in consumption. However, due to the impact of tariffs, the growth forecast was lowered from 1.2% in January to 0.7% this time. Next year's forecast also fell from 0.9% in January to 0.8% this month.
The growth rate for emerging and developing countries this year is also projected at 3.8%, a 0.3 percentage point drop from January. Next year's growth rate is expected to drop 0.2 percentage points during this period, resulting in 3.8% as well.
China maintained its January growth forecast of 4.5%, offsetting the effects of trade barriers with expanded fiscal measures. The growth forecast for next year also remains at the January forecast of 3.9%.
However, for India and South Asia, the growth rate fell by 0.4 percentage points to 5.8% compared to January. Next year's figure is also down by 0.2 percentage points during the same period to 6.7%.
Russia's growth forecast fell from 1.6% in January to 1.4% this month, due to reduced consumption resulting from a tight monetary policy. However, Russia's growth forecast for next year rose by 0.1 percentage points from the January expectation to 1.2%.
WB assessed that downside factors are dominant in the growth forecast for this year. Major downside factors include continued uncertainty from increased tariffs, deepening trade tensions with retaliatory tariffs, low growth in major countries, and occurrences of natural disasters and conflicts.
WB indicated that if the United States lowers its average tariff rate by half and withdraws retaliatory tariffs imposed on trade partners, the global economy this year could rise by 0.1 percentage points. Conversely, if the U.S. raises its average tariff rate by 10 percentage points and maintains retaliatory tariffs against trade partners, the growth rate could retreat by 0.5 percentage points this year.
WB presented policy tasks including alleviating trade tensions, expanding support for emerging markets and developing countries, and addressing climate change. To relax trade barriers, it recommended promoting long-term growth through dialogue and cooperation. Additionally, it advocated for increased international support for emerging markets and developing countries to stimulate foreign direct investment and create jobs. Furthermore, it suggested actively responding to climate disasters to build a sustainable food system.