Developing economies, which drive 60% of global growth, are projected to end the first quarter of the 21st century with their weakest long-term growth outlook since 2000, according to the World Bank’s latest Global Economic Prospects report. Despite global economic stabilization over the next two years, these economies are expected to lag in catching up with advanced economies’ income levels.

The global economy is forecasted to grow by 2.7% in 2025 and 2026, matching the pace of 2024, as inflation and interest rates gradually decline. Growth in developing economies is expected to remain steady at around 4%, which is weaker than pre-pandemic levels and insufficient to significantly reduce poverty or achieve broader development goals.

The World Bank’s report highlights that developing economies experienced rapid growth in the early 2000s, but progress slowed after the 2008-09 Global Financial Crisis. Foreign direct investment (FDI) inflows into these economies have halved since the early 2000s, and new global trade restrictions in 2024 were five times the 2010-19 average. Consequently, overall economic growth has declined from 5.9% in the 2000s to 3.5% in the 2020s.

Indermit Gill, the World Bank Group’s chief economist, noted that developing economies face significant challenges, including high debt, weak investment, low productivity growth, and rising climate change costs. He emphasized the need for domestic reforms to boost private investment, deepen trade relations, and improve the use of capital, talent, and energy.

Developing economies now account for about 45% of global GDP, up from 25% in 2000, and their interdependence has grown. They are crucial for global capital flows, remittances, and development assistance. However, their growth remains closely tied to the performance of major advanced economies like the United States, the euro area, and Japan.

M. Ayhan Kose, the World Bank’s deputy chief economist, stressed the importance of bold policies to enhance cross-border cooperation, strategic trade, and investment partnerships. Modernizing infrastructure and standardizing customs processes are critical for improving trade efficiency.

The report warns that developing economies could face serious headwinds, including high global policy uncertainty, rising trade tensions, and persistent inflation. However, there are opportunities for improvement through infrastructure development, climate transition, and human capital enhancement. Strengthening global trade governance with the support of multilateral institutions is also essential.

Source: (Caribbean News Global)

Analyst Certification – The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view (s) expressed by that research analyst in this research report.

Company Disclosure – The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.