World Bank Predicts Deeper Economic Downturn as African Nations Struggle with Budget Pressures

African countries face a difficult external environment characterized by trade disputes, inflationary pressures, and growing debt burdens, and they are dealing with increasing budget challenges as global GDP is predicted to decline to its weakest pace since 2008.
In the face of a global economic downturn brought on by rising trade tensions and policy uncertainty, the World Bank is advising Nigeria to step up its efforts to diversify its economy and fortify regional trade partnerships.
Nigeria’s economic diversification and deeper integration within Africa are essential to maintaining growth and boosting resilience in the face of growing global challenges because of its strong reliance on oil exports and sensitivity to swings in foreign markets.

The most recent Global Economic Prospects report from the World Bank emphasizes that, barring outright recessions, sustained global trade tensions and policy uncertainty are predicted to cause global growth to fall to its lowest level since 2008. The growth of about 70% of economies, including Nigeria and much of Africa, is expected to be slowed by this slowdown.
It is predicted that global growth will slow to 2.3% in 2025, which is about half a percentage point less than previous projections.
The 2020s are expected to see the slowest average growth rate since the 1960s, but a worldwide recession is not predicted.
But it added there is no expectation of a worldwide slump. If the bank’s predictions for the next two years come to pass, however, average global growth for the first seven years of the 2020s will be the slowest since the 1960s.
These international factors provide serious difficulties for Nigeria. Due to a combination of falling oil prices, rising import prices, and capital flow issues in the face of increased global uncertainty, the International Monetary Fund (IMF) lowered Nigeria’s growth prediction to 3% in 2025 and 2.7% in 2026. Because more than 70% of Nigeria’s export revenue comes from the sale of crude oil, the country is especially susceptible to changes in the price of commodities globally.

Beyond Asia, the developing world is evolving into a place devoid of development. Indermit Gill, Senior Vice President for Development Economics and Chief Economist for the World Bank Group, stated this.
“ Over ten years have passed since it began promoting itself. The growth rate in developing economies has decreased over the past three decades, from 6% per year in the 2000s to 5% in the 2010s to less than 4% in the 2020s.

It follows the growth trajectory of international commerce, which has decreased from an average of 5% in the 2000s to roughly 4.5% in the 2010s and less than 3% in the 2020s. In addition, investment growth has slowed, while debt has reached all-time highs.

In almost 60% of developing economies, growth is predicted to decrease this year. It will average 3.8 percent in 2025 before gradually increasing to an average of 3.9 percent in 2026 and 2027. The average for the 2010s is more than a percentage point higher.

Growth in low-income nations is predicted to be 5.3% this year, which is 0.4 percentage points less than what was predicted at the beginning of 2025. Global inflation is still higher than it was before the pandemic, with an average of 2.9% predicted for 2025. This is due to a combination of tight labor markets and tariff rises.

Developing economies will find it more difficult to create jobs, alleviate severe poverty, and bridge the gap between their per capita income and that of advanced economies if growth slows. The growth in per capita income in developing nations is expected to be 2.9% in 2025, which is 1.1 percentage points less than the average for the years 2000–2019.

According to the analysis, it will take some 20 years for developing nations other than China to reach their pre-pandemic economic output trajectory assuming they can maintain an overall GDP growth rate of 4%, which is the pace predicted for 2027.

If major economies can resolve trade disputes, the Bretton Wood organization stated, global GDP may recover more quickly than anticipated, lowering market volatility and overall policy uncertainty. The study concludes that global GDP would be 0.2 percentage points stronger on average between 2025 and 2026 if trade conflicts of now were settled with accords that cut tariffs in half from their levels in late May.

The World Bank’s deputy chief economist and director of the Prospects Group, Ayhan Kose, stated that emerging-market and developing economies have benefited from trade integration but are now in the forefront of a global trade war.

“The best course of action is to intensify integration efforts with new partners, promote pro-growth reforms, and strengthen fiscal resilience to withstand the storm.” In light of the growing trade obstacles and uncertainties, Kose wrote in the report that “new international cooperation and dialogue can chart a more stable and prosperous path forward.”

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In the face of growing trade obstacles, the paper makes the case that developing nations should aim for broader liberalization by diversifying their trade, particularly through regional accords, and establishing strategic trade and investment alliances with other nations. With limited government resources and growing development requirements, policymakers should prioritize fiscal spending for the most vulnerable households, mobilize domestic income, and fortify fiscal frameworks.

The World Bank stated that in order to boost economic growth, nations must enhance business environments and encourage productive employment by providing individuals with the skills they need and establishing the framework for labor markets that effectively connect workers and businesses.

International cooperation will be essential to helping the most vulnerable emerging economies, especially through multilateral initiatives, concessional financing, and emergency aid and support for nations involved in ongoing wars.

A 14 percent US tariff on Nigerian exports is one example of a trade tension that threatens to lower export demand and foreign exchange inflows. Nigeria’s own 27 percent tariff on American goods further exacerbates the trade friction. Due to these reciprocal duties, Nigerian importers may see higher prices, greater depreciation of the Naira, and disruption of vital supply networks.

Such trade disputes and the uncertainty they cause, the World Bank cautions, are likely to limit Nigeria’s budgetary flexibility and make it more difficult to finance infrastructure and social initiatives. Nigeria and other African countries face additional dangers due to the slowdown in global trade growth, which went from 5% in the 2000s to less than 3% in the 2020s, as well as growing debt levels.

In order to overcome these challenges, analysts advise Nigeria to increase economic diversification by strengthening its own value chains and industrial capability, which will lessen its reliance on outside demand. It may also be possible to reduce global uncertainty by seeking strategic trade alliances within Africa and enhancing regional economic integration.

Sustaining growth and job creation also depends on boosting domestic revenue, improving labor market efficiency, and improving the business climate. Through this time of increased economic uncertainty, Nigeria and other weak African economies will require international cooperation and concessional finance.