Navigating the Global Economic Growth

Risks and Roadmap for Recovery

Date: 18/06/2025

The Shaky Path of Global Growth

Just months ago, it seemed the world was emerging from a series of shocks—from the pandemic to natural disasters and geopolitical tensions. That optimism has faded. Now, global GDP growth is forecast at a mere 2.3% for this year—the slowest pace in nearly two decades outside of recession years. Without decisive policy action, this slowdown risks deepening economic inequality and derailing improvements in living standards.

Why Developing Economies Are Falling Behind

While advanced economies are expected to regain their pre-pandemic per capita output by 2027, many low- and middle-income countries will not. For these economies—especially those excluding China—per capita GDP may remain nearly 6% below where it should be. Feeling the squeeze from declining trade, underwhelming investment, and growing debt, these countries could lose two decades of economic gains unless corrective steps are taken.

Unpacking the Drivers Behind the Decline

1. Waning Momentum in Trade

Trade growth rates have progressively declined—dropping from 5.1% in the 2000s to around 2.6% this decade. This slowdown undermines the economic boost that global exchange of goods and services once provided.

2. Weakening Investment

Private and public sector investments have slowed dramatically, reducing the capital available for infrastructure, technology, and economic expansion.

3. Mounting Government Debt

Developing nations now carry deficits near 6% of GDP, with interest payments consuming a large slice of national budgets. In many places, foreign aid has also receded, escalating debt pressures and reducing fiscal flexibility.

Three Pathways to Recovery

A. Rebuild Global Trade Ties

Reducing tariffs and reviving deep trade agreements—encompassing regulatory alignment—could boost global growth by nearly 0.2 percentage points. Reinvigorating the World Trade Organization would foster a more predictable and efficient trading environment, especially beneficial for export-led developing economies.

B. Strengthen Fiscal Foundations

These countries must enhance revenue flows (around 25% of GDP on average) by broadening tax bases and improving collection. Redirecting subsidies to the most vulnerable, improving public financial management, and containing debt service are crucial to securing long-term fiscal resilience.

C. Drive Employment and Workforce Development

Demographic shifts—such as a doubling working-age population in Sub-Saharan Africa by 2050—demand rapid job growth. Investments in education and skills training can help emerging populations capitalize on urbanization and industrialization trends, promoting economic inclusion and stability.

Turning the Tide: Why Action Matters Now

Policymakers can’t afford to wait. Addressing trade barriers, budget mismanagement, and labor market weaknesses offers a chance to reignite economic momentum, reduce inequality, and restore decades of development progress. The current slowdown is not a distant threat—it’s a global crisis that requires global solutions.

Trade Growth – Job Creation – Economic Development – Emerging Markets – Sustainable Growth