The tariffs and trade related likely shocks will lead to a slower growth in 'Global South', which would subsequently dampen global growth, said Auguste Kouame, country director for India at World Bank on Thursday. Kouame added that the role of Global South in driving global growth has increased significantly in recent years.
"India remains a bright spot in the world economy…having strong domestic fundamentals, which will drive investments in the country going forward" said Kouame, at the India Policy Forum 2025, organised by NCAER.
The WB executive mentioned that the global economy stands on four pillars – US, China, European Union and Global South, and India plays a major role in the GS.
By 2027, the World Bank expects global GDP growth to average 2.5 percent in the 2020s, which would be the slowest rate in any decade since the 1960s. It also predicts that by 2027, the per capita GDP of high-income economies will be approximately where it was in pre-pandemic forecasts, but corresponding levels for developing economies would be 6 percent lower.
"Global south countries will have to face new challenge. This means, we need better policy environment in the global south to attract private investment and generate employment for youth," noted Kouame.
At the same event, Joyce Chang, managing director, JP Morgan said that global economy is going into a stagflation, but not in recession for now.
Chang said that the tariffs once in effect would add to an additional tax of $400 billion for American consumers, and will affect growth to the tune of 0.6-0.7 percentage points. World Bank has projected US’ economy to grow 1.4% in 2025, down from 2.8% in 2024.
She added that US fiscal debt will rise, and the fiscal deficit will rise to 7% to GDP if the "big, beautiful bill" passes. "The bill will drive dollar weakness and shoot up term premium. A lot of financial market volatility will be seen on the bond market side." The bill, which proposes a series of tax cuts, is estimated to shoot up the federal debt by nearly $3 trillion over the next decade.
On India, Chang stated that India is less affected than other emerging market economies (excluding China), because for India, trade’s share in GDP is 40%, but for rest it’s close to 80%.
Meanwhile, Holger Schmieding, chief economist, Berenberg Bank said that Europe is unlikely to change its Carbon Border Adjustment Mechanism (CBAM) as well as it agricultural protection policy.
On trade, Schmieding said that central bank and other regulators will not allow anything similar to happen like that of global financial crisis. "Whatever Trump does, it won’t cause a great financial crisis," he stated.
"Europe has checks and balances. We are incapable of making big mistakes. There is no way we can’t do 145% tariffs on China. We are slow, but can’t start a trade war," said the Berenberg’s chief economist.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
