Kuala Lumpur: Economic growth across most emerging markets and developing economies (EMDEs) is projected to slow, particularly in trade-dependent regions such as East Asia and the Pacific (EAP) and Europe and Central Asia (ECA), with South Asia (SAR) also experiencing a lesser degree of deceleration, according to the World Bank Group.

According to BERNAMA News Agency, the World Bank’s latest Global Economic Prospects report for June 2025 highlights that lower global commodity prices are expected to impact economic activity and government revenues in commodity-exporting countries, especially in regions like the Middle East and North Africa (MNA), Sub-Saharan Africa (SSA), Latin America and the Caribbean (LAC), and ECA. The report underscores a subdued outlook for job creation, crucial for boosting incomes and alleviating poverty.

In trade-exposed regions, the growth slowdown in 2025 compared to the previous year is projected to be widespread, affecting 78 percent of EAP economies and 73 percent of ECA economies. In EAP, the slowdown is largely attributed to tight trade linkages globally and within the region, notably with China, where macroeconomic policy support is expected to counterbalance the adverse effects of escalating trade tensions with the United States. Additionally, recent powerful earthquakes in several EAP economies, including Myanmar, Thailand, and Vanuatu, have disrupted economic activity.

For ECA, the broad-based deceleration parallels the projected weakening growth in the euro area, one of its key export markets, alongside a slowdown in the Russian Federation due to the delayed effects of earlier monetary policy tightening. Despite some recent easing, inflation remains elevated in ECA, driven by higher food prices and strong wage growth.

The World Bank noted divergent inflation trends across EMDEs in 2025. While ECA experienced a rise in late 2024 and early 2025, inflation has moderated somewhat due to easing energy prices but remains above four percent in most ECA subregions. Conversely, inflation has softened in MNA and SAR, although it remains high in some countries. In EAP, inflation mostly declined due to falling commodity prices, with a forecast for stable or modestly declining inflation across regions in 2025, supported by softer energy prices.

The trade outlook for EMDEs remains challenging due to heightened global policy uncertainty, escalating trade tensions between major economies, and an anticipated slowdown in external demand this year. While some EMDEs temporarily benefited from preemptive exports ahead of anticipated tariffs, growing uncertainty and trade restrictions are expected to dampen investment and disrupt global value chains, leading to downward revisions in trade growth forecasts for nearly every region.

Trade growth is projected to slow significantly in EAP and LAC, and to a lesser extent in SSA, while it is expected to pick up in MNA as oil production cuts are reversed, albeit countered by weaker external demand. In SAR, trade growth is anticipated to strengthen, supported by robust domestic demand in India that boosts imports.

Diverging fiscal policies across regions are also noted in the report. In LAC, SAR, and SSA, gradual fiscal consolidation is necessary and may pose modest growth headwinds, though it could address fiscal deficits and stabilize public debt if sustained. In ECA, fiscal policy is expected to remain somewhat supportive, with deficits widening due to rising military expenditures before shifting towards gradual consolidation. In EAP, increased government spending is expected to significantly support demand in China and Thailand, while fiscal support in other large EAP economies is anticipated to be more moderate.

The World Bank warns that risks to the outlook remain tilted to the downside, with global policy uncertainty rising sharply, posing substantial risks to all EMDE regions. Sudden policy changes, particularly in trade, could unsettle financial markets and delay or cancel investments. Regions relying on investment-led growth, especially where linked to trade-intensive production, are particularly vulnerable. This includes EAP and ECA, and to a lesser extent, LAC, MNA, SAR, and SSA. Rising policy uncertainty could also weaken global risk appetite, reducing capital flows to EMDEs, increasing borrowing costs, and leading to currency depreciation and further inflationary pressures. Regions with a high share of low-creditworthy borrowers and large external debt are especially susceptible to sudden market sentiment shifts and external financing conditions. This could particularly affect LAC and SSA, as well as several economies in ECA, MNA, and SAR.