World Bank has  presented its regional economic updates as  it does bi-annually, the Bank released the updates around its recently held World Bank-International Monetary Fund Spring Meetings which was rounded off on Saturday, April 26 in Washington DC.

The updates explore the macro development trends in Africa, East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, the Middle East and North Africa, and South Asia.

AFRICA

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Economic growth in Sub-Saharan Africa is showing some resilience despite uncertainty in the global economy and restricted fiscal space. Regional growth is expected to reach 3.5% in 2025 and further accelerate to 4.3% in 2026-2027.

This growth is mainly due to increased private consumption and investments as inflation cools down and currencies stabilize. The median inflation rate in the region declined from 7.1% in 2023 to 4.5% in 2024.

However, growth is still not strong enough to significantly reduce poverty and meet people’s aspirations – a core concern of the 31^st edition of Africa’s Pulse, which focuses on Improving Governance and Delivering for People in Africa. 

Real income per capita in 2025 is expected to be approximately 2% below its most recent peak in 2015. Countries rich in resources and those facing fragility, conflict and violence are growing more slowly than more diversified economies, and the region is struggling to create enough good jobs for its young population.

According to Andrew Dabalen, World Bank Chief Economist for the Africa Region, “There is a growing gap between people’s aspirations for good jobs and functioning public services and often sub-optimal markets and institutions”.

He continues, “Urgent reforms, backed by more competition, transparency and accountability, will be key to attract private investments, increase public revenue, and create more economic opportunity for millions of Africans entering the workforce each year”.

Sub-Saharan Africa faces heightened uncertainty due to changes in trade dynamics, regional conflict, and climate change affecting people and crops. While the direct and indirect impacts of policy changes will materialize and evolve over time, African economies have the option to liberalize and diversify their markets, including leveraging the African Continent Free Trade Area (AfCFTA) to boost regional trade, to expand economic activity and provide jobs for young people.

The report provides policy recommendations for African governments to maintain growth and rebuild trust in a volatile context. Faced with high debt and declining global aid, countries can seize the opportunity to increase the efficiency of government spending to provide better access to essential services like health, education, water and electricity.

This would strengthen the relationship between governments and taxpayers. Improved public services, a fair tax system, stronger accountability and clear market rules will also help businesses compete, grow, and create jobs.

MIDDLE EAST AND NORTH AFRICA

According to the World Bank’s latest Middle East and North Africa Economic Update, entitled Shifting Gears: The Private Sector as an Engine of Growth in the Middle East and North Africa, the region is estimated to have grown at a modest 1.9 percent in 2024 and growth is forecast to moderately rise to 2.6 percent in 2025. These forecasts are shadowed by uncertainty, given the rapidly changing global environment.

The uptick among oil exporters is linked to plans to roll back cuts in oil production. The rebound in oil importing countries is expected to be driven by an increase in consumption as inflation eases and a recovery in the agricultural sector in some economies.

The forecasts are clouded by high uncertainty, due to factors such as conflict, extreme weather shocks, developments in oil markets and a changing global policy environment.

This uncertainty is further exacerbated by the potential impacts of volatile trade dynamics on global growth and inflation. The report further highlights that conflict can reverse decades of economic progress with long-lasting detrimental effects.

Shifting Gears explores the critical role of the private sector in driving growth, creating jobs and spurring innovation. Stronger growth in the region has been held back by the absence of a thriving private sector.

The report finds that most of the private sector in MENA is not dynamic. Labor market productivity has been largely declining across many countries in the region. Few firms invest and innovate. There is little firm entry into and exit from markets. Moreover, a divide persists between a small formal sector and a large informal sector in terms of productivity. Few women participate in the private sector.

In the words of Ousmane Dione, World Bank Vice President for the Middle East and North Africa, “The region has long underused human capital. Women are largely left out of the labor market. Businesses can find more talent by attracting women leaders, who in turn will hire more women“.

Dione adds, “Closing the gender employment gap could substantially boost income per capita by around 50 percent in a typical MENA economy“.

Both governments and businesses play complementary roles in developing a more dynamic private sector. Governments in the region can boost the performance of firms by promoting competition in markets, improving the business environment, and investing in data collection and access.

“A dynamic private sector is essential to unlocking sustainable growth and prosperity in the region,” added Roberta Gatti, World Bank Chief Economist for the Middle East and North Africa. Gatti also stated that, “To realize this potential, governments across the region must embrace their role as stewards of competitive markets.”

Businesses themselves can build capacity by improving their management practices. Harnessing the untapped talent of women entrepreneurs and workers could foster growth. The report contends that a brighter future for the MENA private sector is within reach if governments rethink their role and firms effectively invest and harness talent.

EAST ASIA AND PACIFIC

In 2024, East Asia and Pacific (EAP) outpaced most regions in economic growth. To sustain this momentum and generate jobs, EAP countries must navigate global uncertainty and tackle long-term challenges tied to shifting global integration, climate change, and demographic trends.

In its 2025 Regional Economic Update, the World Bank projects that growth in EAP will slow down to 4.0 percent in 2025, compared to 5.0 percent in 2024. Prospects for higher or lower growth depend partly on broader growth prospects, but also on how country policies respond to uncertainty in the global environment.

Poverty rates in the region will continue to decline. Around 24 million people in the region are projected to escape poverty between 2024 and 2025, based on the upper-middle-income poverty line.

Growing global uncertainty is having an impact on business and consumer confidence, inhibiting investment and consumption. Trade restrictions are expected to impact EAP’s exports while slower global growth is likely to further reduce external demand.

According to Manuela V. Ferro, Vice President of the World Bank for East Asia and Pacific, “While navigating global uncertainty, countries across EAP have the opportunity to strengthen their economic prospects by embracing and investing in new technologies, opening up business opportunities through bolder reforms, and deepening international cooperation”.

Growth prospects for countries in the region in 2025 are as follows: China at 4.0 percent; Cambodia at 4.0 percent; Indonesia at 4.7 percent; Malaysia at 3.9 percent; Mongolia at 6.3 percent; Lao PDR at 3.5 percent; the Philippines at 5.3 percent; Thailand at 1.6 percent; and Viet Nam at 5.8 percent. Growth in the Pacific Island countries is projected at 2.5 percent.

The World Bank suggests a three-pronged policy response. First, harnessing new technologies could boost productivity and as a result could create more jobs, as shown in Malaysia and Thailand.

Second, reforms to boost competition, especially in services, could create new economic opportunities, as seen in Viet Nam. Third, greater international cooperation can enhance resilience.

“Combining new technologies with bold reform and innovative cooperation could help countries in the region cope with current environment and longer-term challenges.” said World Bank East Asia and Pacific Chief Economist Aaditya Mattoo. “That is the recipe for higher productivity and better jobs.”

SOUTH ASIA

Amid increasing uncertainty in the global economy, South Asia’s growth prospects have weakened, with projections downgraded in most countries in the region.

Stepping up domestic revenue mobilization could help the region strengthen fragile fiscal positions and increase resilience against future shocks, says the World Bank in its twice-yearly regional outlook.

The latest South Asia Development Update, Taxing Times, projects regional growth to slow to 5.8 percent in 2025—0.4 percentage points below October projections—before ticking up to 6.1 percent in 2026.

This outlook is subject to heightened risks, including from a highly uncertain global landscape, combined with domestic vulnerabilities including constrained fiscal space.

Said Martin Raiser, World Bank Vice President for South Asia, “Multiple shocks over the past decade have left South Asian countries with limited buffers to withstand an increasingly challenging global environment”; adding, “The region needs targeted reforms to strengthen economic resilience and unlock faster growth and job creation. Now is the time to open to trade, modernize agricultural sectors, and boost private sector dynamism”.

A key component of strengthening economic resilience will be domestic revenue mobilization. Although tax rates in South Asia are often above the average in developing economies, most tax revenues are lower.

On average during 2019–23, government revenues in South Asia totaled 18 percent of GDP—below the 24 percent of GDP average for other developing economies. Revenue shortfalls are particularly pronounced for consumption taxes but are also sizable for corporate and personal income taxes.

Tax revenues in South Asia are estimated to be 1 to 7 percentage points of GDP below their potential, based on existing tax rates. Some of this shortfall is explained by the widespread informality and large agricultural sectors in the region.

However, even after taking this into account, sizable tax gaps remain, highlighting the need for improved tax policy and administration.

In the words of Franziska Ohnsorge, World Bank Chief Economist for South Asia, “Low revenues are at the root of South Asia’s fiscal fragility and could threaten macroeconomic stability, especially in times of elevated uncertainty”; and that “South Asian tax rates are relatively high, but collection is weak, leaving those who pay taxes with high burdens and governments with insufficient funds to improve basic services.”

The report recommends a range of policies to improve tax revenues by eliminating loopholes, streamlining tax codes, tightening enforcement, and facilitating tax compliance.

This includes paring back tax exemptions; simplifying and unifying the tax regime to reduce incentives to operate in the informal sector; and using digital technology to identify taxpayers and facilitate collection.

The report notes the potential of adopting pollution pricing, which could help address the high levels of air and water pollution while raising government revenues.

Country Outlooks

•  In Afghanistan, with aid declining, the economy is estimated to have grown by 2.5 percent in FY24-25, slower than the pace of population growth and growth is forecast to increase only moderately to 2.2 percent in 2025/26.
• In Bangladesh, growth is expected to slow in FY24/25 to 3.3 percent amid political uncertainty and persistent financial challenges, and the growth rebound in FY25/26 has been downgraded to 4.9 percent.
• In Bhutan, the forecast for FY24/25 has been downgraded to 6.6 percent due to weak agriculture sector growth but upgraded in FY25/26 to 7.6 percent due to expected strength in hydropower construction.
• In India, growth is expected to slow from 6.5 percent in FY24/25 to 6.3 percent as in FY25/26 as the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty.
• In Maldives, the completion of a new airport terminal will contribute to 5.7 percent growth in 2025, although challenges in meeting external debt obligations continue to pose a downside risk.
• In Nepal, the forecast has been downgraded to 4.5 percent in FY24/25, due to damage from floods and landslides, and to 5.2 percent in FY25/26, as a result of persistent weakness in the financial system.
• In Pakistan, the economy continues to recover from a combination of natural disasters, external pressures, and inflation, and is expected grow by 2.7 percent in FY24/25 and 3.1 percent in FY25/26.
• In Sri Lanka, the government has made further progress with debt restructuring, and a projected rebound in investment and external demand is expected to lift growth in 2025 to 3.5 percent before it returns to 3.1 percent in 2026.

LATIN AMERICA AND THE CARIBBEAN

Amid growing global economic volatility, countries in Latin America and the Caribbean must adapt their economic strategies to navigate increasing uncertainties, according to the advance chapter of the World Bank’s Latin America and the Caribbean Economic Review (LACER). 

The report forecasts growth of 2.1% in 2025 and 2.4% in 2026, making it the slowest-growing region worldwide. Low investment, high debt, and a shifting external environment are major barriers to the region’s development.

“The global economic landscape has changed dramatically, marked by higher levels of uncertainty,” said Carlos Felipe Jaramillo, Vice President for Latin America and the Caribbean at the World Bank.

He added, “Countries must recalibrate their strategies and advance bold and practical reforms that boost productivity, competitiveness, while tackling long-standing gaps in infrastructure, education, trade and governance to ensure job creation and better opportunities for businesses and citizens.”

Regional outlook

Despite some progress in controlling inflation, fiscal deficits remain a pressing concern, with the debt-to-GDP ratio expected to reach 63.3% in 2024, up from 59.4% in 2019.

The fast-evolving global economic environment adds further pressure, as persistent inflation in advanced economies may delay interest rate cuts and limit monetary policy options.

Concerns around global trade restrictions create uncertainty around nearshoring and market access, contributing to a more cautious economic and business environment. Slowing growth in China, and cuts in overseas development assistance also contribute to the outlook.

“Access to technology and exploiting scale economies dictate that trade and FDI remain essential to accelerating growth in Latin America and the Caribbean, even in uncertain times. Diversifying trade destinations, expanding service exports, and pursuing potential nearshoring niches offer opportunities, but will require increasing both productivity and nimbleness. This, in turn, requires progress on long overdue reforms behind the border in business environment, human capital, and innovation,” said William Maloney, Chief Economist for Latin America and the Caribbean at the World Bank.

EUROPE AND CENTRAL ASIA

Economic growth in the developing economies of the Europe and Central Asia region is likely to slow, says the World Bank’s Economic Update for the region. Regional growth is now expected at 2.5% in 2025-26 owing to weaker external demand and a slowdown in Russia.

In 2024, growth across the region stabilized at 3.6% buoyed by private consumption and supported by robust real wage increases, higher remittances, and stepped-up consumer borrowing, all of which offset weaker external demand due to low growth in the European Union.

Higher increases in prices for food and services resulted in higher inflation, which increased to 5% year-on-year by February 2025, from 3.6% in mid-2024. The recent pickup in inflation prompted several central banks to hike policy rates or delay further easing.

“While countries of the Europe and Central Asia region were able to maintain steady growth last year, global uncertainty, geoeconomic fragmentation and weak expansion among key trading partners are making it more challenging to sustain this growth,” said Antonella Bassani, World Bank Vice President for Europe and Central Asia; adding, “To achieve stronger economic expansion over the long term, it is crucial for the countries in the region to accelerate domestic structural reforms that foster a dynamic and innovative private sector, entrepreneurship and technology adoption”.

Central Asia is likely to remain the fastest growing sub-region this year and next, even with growth forecast to ease to 4.7% in 2025-26. The slowdown is due to a weaker expansion of the oil sector in Kazakhstan as well as declining exports and the normalization of remittances inflows.

In the South Caucasus, growth is projected to average 3.5% in 2025-26, as spillovers from trade intermediation, labor and capital inflows continue to diminish.

Trade policy uncertainty, increased trade barriers, and indirect spillovers from euro area supply chains are expected to temper recoveries elsewhere in the region. Growth in the Western Balkans is expected to moderate to 3.4% in 2025-26, while Central Europe should improve only slightly to 2.7%.

In Russia, growth is projected to fall to 1.3% during 2025-26. Growth in Türkiye is likely to improve modestly to 3.3% in 2025-26, although it will remain below its long-term trend, as external demand remains weak and the economic rebalancing continues. Growth in Ukraine is likely to decrease to 2% in 2025.

In a special analysis of how to accelerate growth in the current challenging global environment, the report stresses the importance of a dynamic private sector.

Countries should invest more in innovation, undertake reforms to support young companies, deepen financial markets, and increase research and development (R&D) investment while continuing to focus on integrating global technology, expertise, and capital.

For the middle-income countries in the region to achieve high-income status, their economies need to become more dynamic. Countries that have successfully transitioned to high-income status have done so through entrepreneurial dynamism and innovation and should sustain such growth by leveraging technology, expertise and capital to enhance within-firm productivity growth.

“Innovation and experimentation in business are essential for boosting productivity and a prerequisite for achieving and sustaining high-income status,” said Ivailo Izvorski, World Bank Chief Economist for Europe and Central Asia. “Middle-income countries in the region can reach high-income status if firms grow, innovate, and compete. While every country needs its own approach to reignite growth, spurring innovation and enabling business dynamism is crucial.”

The report argues that investing in young, innovative companies is needed rather than the entire small and medium enterprise (SME) sector, as these companies are generating jobs.

This approach should be supported by improving access to finance, especially long-term and risk capital. The region does not have enough finance as venture capital and equity finance remain underdeveloped.

Strengthening competition is essential to allow such dynamic firms to emerge. The region has too many small, low-productivity businesses and few large companies outside of state-owned enterprises (SOEs), which often dominate markets and stifle entrepreneurial dynamism.

Policies that encourage business innovation and technology adoption, such as larger and better-targeted R&D incentives, are also needed to help firms become more productive and innovative.

Many firms in the region currently rely on resource reallocation and operate as production facilities for foreign companies instead of developing their own technologies.

Finally, investing in human capital is essential for attracting and retaining highly skilled workers and entrepreneurs, as well as for creating opportunities to upgrade skills through training.

 

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