The International Monetary Fund (IMF) has lowered its global growth forecast for 2026 to 3.0%, warning that the conflict in the Middle East, rising trade fragmentation and uncertainty surrounding artificial intelligence continue to pose significant risks to the global economy.
In its latest World Economic Outlook update released on Wednesday, the IMF said the global economy has remained more resilient than previously expected despite the ongoing conflict. Strong demand in the technology sector helped offset the impact of reduced energy supplies, preventing a sharper economic slowdown.
The fund expects global growth to rebound to 3.4% in 2027, though it would remain below the average recorded in 2024 and 2025.
The IMF also raised its 2026 global inflation forecast to 4.7%, up from its April projection, while expecting inflation to ease to 3.9% in 2027. It said energy prices remain about 25% higher than before the conflict began on February 28 and are expected to stay elevated. The forecast assumes shipping through the Strait of Hormuz will gradually resume from mid-July and return to pre-war conditions by March 2027.
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Despite the global economy performing better than expected, the IMF cautioned that significant risks remain. Energy-exporting nations and countries with strong technology sectors are expected to perform better, while commodity-importing economies with limited exposure to AI-driven growth are likely to face weaker economic prospects.
Global trade growth is projected to slow sharply to 3.5% in 2026 from 5.0% in 2025 before recovering to 4.3% in 2027, reflecting the impact of trade disruptions and the earlier front-loading of shipments ahead of higher US tariffs.
The IMF said governments and businesses have helped ease supply disruptions by drawing on strategic oil reserves, commercial inventories, improving energy efficiency and developing alternative trade routes. However, it warned that renewed fighting in the Middle East could leave the global economy more vulnerable, particularly as many countries have already depleted much of their emergency energy reserves.
The warning comes after the United States launched fresh military strikes against Iran and revoked a licence allowing Tehran to export oil following attacks on tankers in the Strait of Hormuz. The IMF warned that any prolonged escalation could trigger another spike in energy prices, drive inflation higher and further weaken global economic growth.
The latest outlook also revised growth forecasts for several major economies. The United States’ 2026 growth forecast remains unchanged at 2.3%, while its 2027 projection was raised slightly to 2.2%. The euro area’s 2026 forecast was lowered to 0.9%, while Japan’s outlook was trimmed to 0.6%.
Among emerging markets, China received a modest upgrade, with growth now expected to reach 4.6% in 2026, while India’s forecast was lowered slightly to 6.4%. The Middle East and Central Asia recorded the steepest downgrade, with growth for 2026 cut to 0.7%, reflecting the continued economic impact of the regional conflict.
