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Dismal Forecast
It’s often said that economics is the dismal science, and this week, it appeared to be so. Economists, usually not fans of tariffs, have begun to roll out their predictions for growth in the wake of the White House’s ongoing global trade war.
Notably, The World Bank published a report this week predicting a weakening of global growth to 2.3% in 2025. That sliced nearly half a percentage point over what had been expected at the start of the year and included deceleration in most economies relative to last year. “The sharp increase in tariffs and the ensuing uncertainty are contributing to a broad-based growth slowdown and deteriorating prospects in most of the world’s economies,” the report said. Inflation is expected to stay high, in part because of tariffs, and geopolitical tensions remain elevated.
In the United States, the eurozone and Japan, the prospects are even worse. The World Bank projects real GDP growth in the U.S. of 1.4% in 2025 and 1.6% in 2026, down from an estimated 2.8% in 2024. “Only six months ago, a ‘soft landing’ appeared to be in sight: The global economy was stabilizing after an extraordinary string of calamities both natural and man-made over the past few years,” the organization warned. “That moment has passed.”
Other headwinds include global debt levels, with nations paying higher interest rates on that debt. If conditions don’t change, The World Bank estimates that global GDP growth will average just 2.5% in the 2020s, the slowest pace of any decade since the 1960s.
If that weren’t bad enough, I wanted a stiff drink after listening to a recent Moody’s Analytics podcast. Chief economist Mark Zandi summed up his conclusions on the May jobs report from the U.S. Department of Labor, adding in a LinkedIn post that the economy may slow to 1% growth rather than “the 2% we have come to see as typical,” he wrote.
With all the negativity in the air, it’s easy to overreact. But even The World Bank offers a path to a brighter outlook. Trade tensions could resolve on fruitful negotiations between countries. A lowering of interest rates among the world’s central banks could fuel more growth. And recent advances in technology, including artificial intelligence, could lead to widespread investment and productivity gains. While that might not make economic reports jovial, it would be a start.
• Naomi Snyder, editor-in-chief for Bank Director
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