(Yicai) Jan. 21 -- The World Bank Group released its highly-anticipated Flagship Report on 2025 Global Economic Prospects on January 17. This year’s edition dashed any hopes of a quick, robust rebound of the world economy.

The study, which marks the start of the end of the 21st century’s first quarter, speaks rather in subdued terms of sluggish growth and recovery compared to the decade preceding it, and of the likely frustration of hopes cherished at the century’s start of eliminating poverty and raising living standards worldwide by a set date.

The 200+ page report breaks the globe down into geographic regions, and further into advanced economies, emerging market and developing economies (EMDEs), and low-income countries (LICs) for its analysis, key takeaways from which are as follows.

“The global economy appears to be settling at a low growth rate… insufficient to foster sustained economic development - with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters,” per the World Bank, this despite “Global growth.. expected to hold steady at 2.7 percent in 2025-26.” 

Estimated to have also stabilized at that rate last year, the 2.7-percent mark means growth will languish at 0.4 of a percentage point below its 2010-19 level as post-pandemic output continues to lag. Global potential growth is also believed to have shrunk by about one-third since the 2000s, the report further notes.

Turning to the major economies, muted upticks in the euro area and Japan will buck a slowdown in the United States. Growth in the US may stall even further if trade protectionism spikes under the incoming administration or the labor market unexpectedly cools, the report predicts, while, in China, a deeper or more protracted property sector downturn might further enervate overall activity. The report hedges this prediction, however, with the optimistic caveat that, “This outlook assumes no major shifts in trade or fiscal policies.”

Growth in EMDEs is poised to linger at about 4 percent in 2025-26. EMDEs - which drive 60 percent of global growth - are entering the 21st century’s second quarter with their per capita incomes’ game of catch-up with advanced economies’ slower than its tempo of a decade ago. EMDE per capita income growth is projected to stay comparatively lackluster over 2025- 26 at around 3.1 percent, which is considerably weaker than the average pace over 2000-19. Thus, without a reset, few LICs are likely to break through the income parity ceiling by mid-century. 

“Barring a sustained improvement in growth rates, only six of today’s 26 [LICs] are likely to achieve middle-income status by 2050,” per the report, and, “about half of LICs are in, or close to, debt distress.”

“By 2030, 622 million people will remain in extreme poverty. Hunger and malnutrition will remain the fate of roughly the same number,” the study also projects.

Among the litany of adverse factors the report cites, “Ever more frequent climate-change-related disasters with worsening impacts [that] may hurt near-term growth while amplifying the slowdown in the fundamental drivers of long-term growth” is an oft-recurring one.

A few bright spots do glimmer amid the general gloom, however. “The global economic context has become modestly more favorable since last June, following several years characterized by overlapping negative shocks. Inflation appears to be moderating without a substantial slowdown in key economies, and monetary policy easing has now become widespread.” The report also points to falling commodity prices for staple crops as a deflationary bonus for commodity importers, but as a headwind for exporters, which three-fifths of EMDEs are.

Furthermore, EMDEs currently claim around 45 percent of global GDP - a 25-percent rise from 2000 - in a leap propelled by strong aggregate growth in the three biggest EMDEs - China, India, and Brazil. Together, EMDEs have accounted for some 60 percent of annual global growth since 2000, on average, double their share during the 1990s. This surge - particularly during the first decade of the century - was driven by rapid global trade and financial integration.

These twin pistons of growth are now running out of steam, however, and the result will be tepid growth and ever-more elusive poverty alleviation and equitable wealth distribution goals against a backdrop of intensifying geopolitical fragmentation and worsening climate change, the World Bank suggests.

The report was previewed the day before its official release at the International Finance Forum (IFF) Global Membership Meeting by Dr Ayhan Kose, Deputy Chief Economist and Director of Prospects Group at the World Bank.