World Bank sees global growth slowing to a near two decade low in 2025

Global growth to slow down to lowest rate since 2008 on the back of trade conflicts: The World Bank expects GDP growth to weaken to 2.3% in 2025 on a global level, in what would mark the slowest rate of growth in almost 17 years, without counting outright global recessions, the bank wrote in its latest Global Economic Prospects report (pdf). The forecast for 2025 represents a drop of 0.4 percentage points from the bank’s previous forecast in January, while its forecast of 2.4% growth in 2026 is 0.3 percentage points lower than the bank’s prediction at the start of the year.

The rationale: The bank sees global growth deteriorating on the back of a “substantial rise in trade barriers and the pervasive effects of an uncertain global policy environment,” with the outlook largely depending on how trade policy evolves globally. “Growth could turn out to be lower if trade restrictions escalate or if policy uncertainty persists, which could also result in a build-up of financial stress,” the report reads.

The risks don’t end there: Other risks to growth include “adverse global spillovers, worsening conflicts, and extreme weather events,” as well as the possibility of lower-than-expected growth in major economies.

Some hope? However, the outlook could improve should major economies sign “lasting agreements that address trade tensions,” the bank said.

^^This is already happening: The US and China have finally reached a trade agreement that could end a long and heated tit-for-tat that started with the US’ imposition of a 145% tariff on Chinese imports, though few details have emerged and the final agreement still requires sign-offs from the countries’ leaders.

The US is now expected to see its GDP growth slow to 1.4% in 2025, before seeing a slight uptick to 1.6% in 2026. The forecast for 2025 is 0.9 percentage points lower than it was in the bank’s forecast in January, while that of 2026 is 0.4 percentage points lower than the previous forecast.

The bank also trimmed the Euro Area’s growth forecast, expecting growth to slow to 0.7% in 2025 (0.3 percentage points lower than the previous forecast) before rising slightly to 0.8% in 2026 (0.4 percentage points lower than the previous forecast).

As for China, the World Bank kept its forecast for the country unchanged at 4.5% growth in 2025, and 4.0% in 2026, “as the impact of higher trade barriers and weaker external demand is assumed to be offset by the boost from additional fiscal policy support,” it wrote.

REGIONALLY- Growth in the MENA region is expected to strengthen to 2.7% in 2025 — up 0.1 percentage points from its previous forecast in April — before strengthening further to 3.9% in 2026-27, on the back of “an expansion of oil activity in oil exporters, which more than offsets the adverse effects of weakening external demand and lower oil prices.”

Growth in GCC economies is expected to increase to 3.2% in 2025 (unchanged from its April forecast), 4.5% in 2026, and 4.8% in 2027. “The phase-out of OPEC+ oil production cuts starting in April 2025 is expected to lead to rising oil production, despite projected lower oil prices amid weakening global demand,” according to the report.

MARKETS THIS MORNING-

Asian markets are mixed this morning, with Hong Kong’s Hang Seng index and Japan’s Nikkei leading losses. South Korea’s Kospi, on the other hand, is up 0.3%. Over on Wall Street, futures are subdued despite news of a trade agreement between the US and China and positive May inflation data.

THE CLOSING BELL-

The DFM fell 0.1% yesterday on turnover of AED 447.7 mn. The index is up 8.4% YTD.

In the green: Emirates Reem Investments Company (+9.3%), Dubai National Ins. and Reins. (+8.8%) and Union Properties (+5.3%).

In the red: International Financial Advisors (-10.0%), Gulf Navigation Holding (-6.3%) and Al Salam Sudan (-4.2%).

Over on the ADX, the index rose 0.1% on turnover of AED 1.8 bn. Meanwhile, Nasdaq Dubai was up 0.2%.

CORPORATE ACTIONS-

IFA Hotels nears multi-mn debt settlement: IFA Hotels & Resorts Dubai is in line for a KWD 14.7 mn (AED 176.1 mn) debt write-down under a settlement offer that has received initial approval from its parent company DFM-listed Kuwaiti conglomerate International Financial Advisors Holding (IFA), according to a bourse disclosure (pdf). The plan also covers KWD 2.69 mn (AED 32.25 mn) owed by the firm’s Kuwait-based hotel arm, with both debts set to be cleared through a capital increase in IFA Hotels and Resorts. The transaction remains subject to procedural steps tied to the capital hike.