WASHINGTON, January 16, 2025—Developing economies, which drive 60 percent of global expansion, are expected to end the first quarter of the 21st century with the weakest long-term expansion clients since 2000, according to the World Bank’s latest World Economic Outlook. report. Even if the global economy stabilizes over the next two years, emerging economies are expected to grow more slowly to reach the income levels of complex economies.

The global economy is projected to expand by 2.7% in both 2025 and 2026, the same pace as in 2024, as inflation and interest rates decline gradually. Growth in developing economies is also expected to hold steady at about 4% over the next two years. This, however, would be a weaker performance than before the pandemic—and insufficient to foster the progress necessary to alleviate poverty and achieve wider development goals. 

The World Bank’s analysis is its first systematic assessment of the performance of developing economies in the first quarter of the 21st century. It finds that, during the first decade, developing economies grew at the fastest clip since the 1970s. Yet progress ebbed after the Global Financial Crisis of 2008-09. Global economic integration faltered: as a share of GDP, foreign direct investment (FDI) inflows into developing economies are at about half the level of the early 2000s. New global trade restrictions in 2024 were five times the 2010-19 average. As a result, overall economic growth dropped—from 5.9% in the 2000s to 5.1% in the 2010s to 3.5% in the 2020s. Since 2014, with the exception of China and India, the average per capita growth rates of income in developing economies have been half a percentage point lower than that in wealthy economies, widening the rich-poor gap.

“The next 25 years will be a tougher task for emerging economies than the last 25 years,” said Indermit Gill, World Bank Group lead economist and senior vice president for progress economics. “Most of the forces that once contributed to its development have dissipated. In their position they have encountered formidable headwinds: a huge debt burden, weak investment and productivity growth, and the emerging prices of climate change. In the coming years, emerging economies will want a new strategy that emphasizes domestic reforms to boost personal investment, deepen industrial relations and promote more effective use of capital, skills and resources. ‘energy.

Developing economies are more vital to the global economy than at the beginning of the century. They account for about 45 percent of global GDP, up from 25 percent in 2000. Their interdependence has also increased: more than 40 percent of global GDP. The percentage of exports of their products goes to other emerging economies, twice as much as in 2000. Developing economies also have a vital source of global capital flows, remittances and progress assistance to other emerging economies. economies: between 2019 and 2023, they represented 40% of global remittances, compared to 30% in the first decade of the century.

As a result, those economies now have a greater influence on the expansion and progression outcomes in other emerging economies. For example, a 1 percentage point increase in GDP expansion in the three largest emerging economies (China, India and Brazil) tends to result in a cumulative GDP increase of almost 2% in the other emerging economies after three years. . . However, these effects constitute only part of the effect of the expansion on the three largest economies: the United States, the eurozone and Japan. In summary, the well-being of emerging economies remains strongly linked to the expansion of the three main complex economies.

“In a world shaped by policy uncertainty and trade tensions, developing economies will need bold and far-reaching policies to seize untapped opportunities for cross-border cooperation,” said M. Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group. “A good start would be to pursue strategic trade and investment partnerships with the rapidly expanding markets of other developing nations. Modernizing transportation infrastructure and standardizing customs processes are critical steps to cut unnecessary expenses and foster greater trade efficiency. Finally, sound macroeconomic policies at home will fortify their capacity to navigate the uncertainties of the global outlook.”

Over the next two years, developing economies could face serious headwinds, the report notes. High global policy uncertainty could undercut investor confidence and constrain financing flows. Rising trade tensions could reduce global growth. Persistent inflation could delay expected cuts in interest rates. Yet the global economy could also do better than expected—especially if its largest engines, the United States and China, manage to gain steam. In China, additional stimulus measures could boost demand. In the United States, robust household spending could result in stronger-than-expected growth, with beneficial effects for developing economies.

The report argues that emerging economies have many features to enhance their expanding customers, despite headwinds. With the right policies, those savings can even turn some challenging situations into meaningful opportunities. Addressing infrastructure needs, accelerating the climate transition and improving human capital can improve customer growth while helping to achieve climate and growth goals. At the same time, all countries deserve to work together on global industrial governance, with the help of multilateral institutions.

Download the full report: https://bit.ly/GEP-January-2025-Full-Report

Download expansion data: https://bit. ly/GEP-January-2025-Data

Download Graphics: https://bit. ly/GEP-January-2025-Charts

Regional perspectives: 

East Asia and the Pacific: Growth is expected to slow to 4. 6% in 2025 and 4. 1% in 2026. For more information, see the regional outlook.

Europe and Central Asia: Growth is expected to moderate to 2. 5% in 2025 before reaching 2. 7% in 2026. For more information, see the regional overview.  

Latin America and the Caribbean: Growth is expected to reach 2. 5% in 2025 and 2. 6% in 2026. For more information, see the regional overview.  

Middle East and North Africa: Growth is projected to be 3. 4% in 2025 and 4. 1% in 2026. For more information, see the regional summary.

South Asia: Growth is projected to rise to 6.2% in 2025 and remain at that rate in 2026. For more, see regional overview. 

Sub-Saharan Africa: Growth is expected to firm to 4.1% in 2025 and 4.3% in 2026. For more, see regional overview. 

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