The World Bank’s just released flagship report Global Economic Prospects sounds a warning for the global economy, which is projected to slow dangerously through the next few years, while also showing substantial changes.

Though Donald Trump and the US tariffs are not directly mentioned, the report obviously has them in mind as the major threat to global economic well-being. 

The dangers to the global economy are clear from the report’s opening words: “Only six months ago, a ‘soft landing’ appeared to be in sight: the global economy was stabilising after an extraordinary string of calamities both natural and man-made over the past few years. That moment has passed. The world economy today is once more running into turbulence. Without a swift course correction, the harm to living standards could be deep.” The “six months” is clearly telling, paralleling the Trump presidency.

“This year alone, our forecasts indicate the upheaval will slice nearly half a percentage point off the global GDP growth rate that had been expected at the start of the year, cutting it to 2.3%… By 2027, global GDP growth is expected to average just 2.5% in the 2020s – the slowest pace of any decade since the 1960s.

“The poorest countries will suffer the most. By 2027, the per capita GDP of high-income economies will be roughly where it had been expected to be before the COVID-19 pandemic. But developing economies would be worse off, with per capita GDP levels 6% lower.

“Growth in developing economies has now been ratcheting downward for three decades in a row – from an average of 5.9% in the 2000s to 5.1% in the 2010s to 3.7% in the 2020s. That happens to track the declining trajectory of growth in global trade – which has fallen from an average of 5.1% in the 2000s to 4.6% in the 2010s to 2.6% in the 2020s.” Clearly the trade wars, initiated by Trump, are likely to lead to a further trade decline.

“The global economy today is at an inflection point. The forces that once drove economic convergence and lifted billions out of poverty are now in retreat.”

“Policy uncertainty” (surely again a reference to the bomb Trump has thrown into the world economy), “extreme weather events” and “worsening conflicts” are mentioned as chief factors in the report, hampering economic growth. 

The World Bank proffers solutions, these given from a Western neoliberal perspective. 

First, rebuild trade relations, the breakdown of which, is projected to shave 0.2% from global growth over the course of 2025 and 2026. 

Second, restore fiscal order by ending the era of easy money, whereby governments opted to take too many risks for far too long, causing current fiscal deficits to average nearly 6% in developing economies, interest costs alone accounting for about a third of the deficits of these countries. Debt forgiveness doesn’t get a look in, nor the setting of longer terms for repayment, something which would allow these nations to better use loans to build more sustainable means of repayment and ongoing economic development. Current short-term loans allow little means of forward planning, but rather offer a chasing of one’s tail from repayment of one debt by incurring another.

Third, accelerate job creation. Massive population growth in many of the poorest countries, the report states, makes this an imperative. Sub-Saharan Africa’s working-age population, it is claimed, will almost double by 2050, growing to more than 600 million. Again, no answer is given as to how such job creation can happen without incurring further debt.

The report examines nations’ prospects. The World Bank expects the US to perform very poorly, projecting a growth rate of 1.4% in 2025, half that of 2024. Prospects are little improved in 2026 (1.6%) and 2027 (1.9%). It is Europe, however, which is projected to do worst. Growing just 0.9% in 2024, an improvement on the 0.4% of 2023 (both sharply down from the 3.4% of 2022), Europe will grow just 0.7% in 2025, 0.8% in 2026, and 1% in 2027. 

Growth has clearly moved to Asia. In what the Bank categorises as “East Asia and the Pacific”, growth in 2023 was an impressive 5.2%. It will fall from that high plateau, but still register 5% in 2024, 4.5% (2025), and 4% in both 2026 and 2027. China, which has been the main driver of Asian growth, is inevitably slowing in percentage terms as its GDP has risen. Still its performance is impressive; 5.4% (2023), 5% (2024), 4.5% (2025), dropping to 4% (2026) and 3.9% (2027). Further, while most countries have had their growth rates downgraded sine January 2025 (the advent of Trump II), China’s figures have been unaffected. So much for Trump’s economic war on China!

To put these growth figures in perspective, an economy growing at 5% doubles in just 14 years. One growing at 2% will take 35 years. In that 35 years, the faster growing economy would have increased nearly six times over. Given, China is already larger than the US in Purchasing Power Parity, $37.1 trillion to $29.2 trillion, in just 10 years China could outstrip the US by something like $61 trillion to $35 trillion. That comes as an incomprehensible shock to many.

Further shock comes with India, currently the third largest economy on PPP terms at $16.0 trillion. In 2022, India grew 7.6%, increasing to 9.2% in 2023, before dropping to 6.5% in 2024, and is projected to grow at 6.3% (2025), 6.5% (2026) and 6.7% (2027). On those figures, India will have an economy of just over $30 trillion by 2035, almost equal to that of the US.

The Bank’s figures show Asia, both South and East, to be the drivers of global growth. Vietnam is growing at about 6% p.a. while Indonesia’s annual growth is about 5%. Given all the above Asian numbers, to invoke Paul Keating’s plea, when will Australia, its political and business leaders, grasp that its future lies in Asia?

The report shows a global order undergoing both a rapid and momentous change. Trump’s tariffs have come as a hiccup, but the longer term overall trajectory is clear. The centre of the world is moving from West to East, though one would hardly know from accepted mainstream discourse in Australia.

The views expressed in this article may or may not reflect those of Pearls and Irritations.