IMF Trims 2026 Global Growth Outlook to 3%, Expects Recovery in 2027

The International Monetary Fund (IMF) has slightly lowered its forecast for global economic growth in 2026 to 3.0%, citing continued uncertainty from the conflict in the Middle East, increasing trade fragmentation, and the possibility of corrections in expectations surrounding artificial intelligence.

According to the IMF, demand for AI and other advanced technologies has helped cushion the impact of reduced energy supplies caused by the conflict. The organization expects global growth to improve to 3.4% in 2027, although that would still remain below the average recorded in 2024 and 2025.

The IMF also revised its inflation outlook, raising its forecast for headline inflation in 2026 to 4.7%. It expects inflation to ease to 3.9% in 2027, while noting that energy prices remain significantly above pre-war levels.

Its projections assume that shipping through the Strait of Hormuz begins to normalize from mid-July, with conditions returning to pre-war levels by March 2027 and average oil prices remaining around $89 per barrel.

The report projects global trade growth slowing to 3.5% in 2026 after reaching 5% in 2025, before improving to 4.3% in 2027.

The IMF left its 2026 growth forecast for the United States unchanged at 2.3%, while reducing the euro area's outlook to 0.9%. Japan's forecast was lowered to 0.6%, whereas South Korea's projection was increased to 2.6% due to strong AI hardware exports.

Among major emerging economies, China's 2026 growth forecast was raised to 4.6%, while India's outlook was slightly reduced to 6.4%. The IMF also lowered its 2026 forecast for emerging market and developing economies to 3.8%.

The fund cautioned that renewed conflict in the Middle East, sustained high oil prices, or a correction in AI-related markets could create additional risks for the global economy.