World Bank Cuts Global, LatAm Growth Outlook on Trade Tensions

The World Bank lowered its growth forecasts for the global economy and Latin America, citing the effects of increased US tariffs and ongoing trade tensions.

Global economic growth is now projected at 2.3% for 2024, down 0.4 percentage points from January estimates. Similarly, Latin America and the Caribbean are expected to grow by 2.3%, a 0.2-point reduction from earlier projections, according to the World Bank’s latest Global Economic Prospects report.

“Just six months ago, a soft landing — inflation control without recession — seemed possible,” said Indermit Gill, Chief Economist, World Bank. “Now the outlook points to new turbulence.” He warned that failing to adjust policies could severely impact global living standards.

The report attributes the slowdown primarily to tariffs imposed during the Trump administration and the US-China trade conflict, which have dampened global trade growth. While a global recession is not anticipated this year, the World Bank cautions that current trends could make the 2020s the weakest decade for global economic growth since the 1960s.

In Latin America, resilient domestic demand is expected to offset some economic challenges, but export growth may falter due to rising protectionism and political uncertainty. A projected decline in commodity prices adds further strain to the region's economic outlook.

Mexico, Latin America’s second-largest economy, faces the steepest revision, with growth forecast at just 0.2% in 2024 — a sharp 1.3-point cut from earlier projections — and 1.5% in 2026. The World Bank cites the US imposition of 25% tariffs on Mexican imports outside the USMCA trade agreement, which has weakened the country’s exports. Approximately 80% of Mexico’s exports go to the United States, with nearly half falling outside USMCA coverage.

Additionally, high interest rates are expected to curb domestic demand in Mexico.

Mexico’s President, Claudia Sheinbaum, criticized international financial institutions' forecasting models, arguing that they fail to account for national policies, such as the government’s “Plan Mexico” initiative.