Economic growth across most emerging markets and developing economies (EMDEs) is expected to slow in 2025, particularly in trade-dependent regions such as East Asia and the Pacific (EAP), Europe and Central Asia (ECA) and to a lesser extent, South Asia (SAR), the World Bank said in its June Global Economic Prospects report.
The slowdown in EAP is largely attributed to tight trade linkages especially with China while ECA’s deceleration reflects weaker demand from the euro area and a slowdown in Russia due to past monetary tightening. Commodity-exporting regions like the Middle East and North Africa (MNA), Sub-Saharan Africa (SSA), Latin America and the Caribbean (LAC) and ECA are also expected to face pressure from lower global commodity prices.
“Prospects for spurring the job creation needed to lift incomes and reduce poverty are subdued,” the World Bank warned.
Inflation trends remain uneven across EMDEs. ECA continues to face elevated inflation above 4% in most subregions, driven by food prices and wage growth, although it has begun to ease. In contrast, MNA and SAR have seen softening inflation, while EAP experienced declines due to falling commodity prices.
The trade outlook remains challenging due to rising global policy uncertainty, intensifying trade tensions and weaker external demand. Although some countries temporarily benefitted from front-loading exports ahead of anticipated tariffs, the Bank said ongoing uncertainty is likely to suppress investment and disrupt global value chains.
Fiscal policy stances are diverging. While LAC, SAR and SSA are expected to pursue gradual consolidation to address deficits, ECA will maintain a looser stance due to rising military spending. In EAP, increased spending in China is set to support demand, though fiscal impacts elsewhere in the region are expected to be neutral.
The World Bank cautioned that rising global policy uncertainty poses a key downside risk, especially for regions reliant on investment-led, trade-intensive growth. It also noted that capital flows could weaken and borrowing costs may rise, putting pressure on EMDEs with large external debt, particularly in LAC, SSA, ECA, MNA and SAR.
