Developing economies, including the Philippines, are projected to have the weakest average growth in the first 25 years (2001–2025) of the century, and these countries will continue to grapple with growth setbacks in the next quarter, the World Bank said.
According to the multilateral lender’s latest Global Economic Prospects report, published on Jan. 16, developing economies are projected “to finish the first quarter of the 21st century with the weakest long-term growth outlook since 2000.”
“Even as the global economy stabilizes in the next two years, developing economies are expected to make slower progress in catching up with the income levels of advanced economies,” World Bank said.
The World Bank expects developing economies—which fuel 60 percent of global growth—to expand at a steady rate of about 4 percent for 2025 and 2026.
However, the World Bank noted that this rate “would be a weaker performance than before the pandemic,” adding that this would be “insufficient” to reduce poverty or drive further growth.
Slower economic growth was seen after the 2008–2009 global financial crisis, with foreign direct investment (FDI) halving the pre-crisis level and trade restrictions surging in 2024.
These headwinds resulted in overall economic growth declining from 5.9 percent in the 2000s to 5.1 percent in the 2010s to 3.5 percent in the 2020s. The Philippine economy, in particular, shrank by 9.5 percent during the pandemic (2020).
It rebounded in 2021 with a full-year growth rate of 5.6 percent, further accelerated to 7.6 percent in 2022, and settled to 5.6 percent in 2023.
Despite the gradual recovery of the Philippines from the pandemic, the incomes of Filipinos and people from developing countries (excluding China and India) have grown at a slower pace than those in rich countries, further widening the rich-poor gap since 2014.
Tougher 25 years ahead
“The next 25 years will be a tougher slog for developing economies than the last 25,” said Indermit Gill, World Bank Group’s chief economist and senior vice president for development economics.
Gill argued that the factors that previously contributed to the development of poor countries have already disappeared.
“In their place have come daunting headwinds: high debt burdens, weak investment and productivity growth, and the rising costs of climate change,” Gill noted.
He advised the emerging economies to come up with a fresh strategy focused on domestic reforms to boost private investment, strengthen trade ties, and use capital, talent, and energy more efficiently.
Such was his recommendation because “developing economies are more important for the global economy than they were at the start of the century.” Economies of developing countries now make up around 45 percent of the world’s gross domestic product (GDP), up from its 25 percent share in 2000.
M. Ayhan Kose, World Bank’s deputy chief economist and director of the prospects group, also suggested that developing nations should focus on trade and investment partnerships, improve infrastructure, streamline customs, and implement strong economic policies to better handle global uncertainties.
On risks, the report also noted some “serious headwinds” that the developing countries could face over the next two years.
“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,” it said.
Despite this, it also asserted that developing economies “have many options to improve their growth prospects, despite the headwinds. With the right policies, these economies can even transform some challenges into significant opportunities.”