The International Monetary Fund has trimmed its forecast for global economic growth this year, and has warned that a prolonged Middle East conflict could fuel an “energy crisis on an unprecedented scale.”
“The global outlook has abruptly darkened following the outbreak of war in the Middle East,” Pierre-Olivier Gourinchas, economic counsellor at the IMF, wrote in the IMF’s latest World Economic Outlook report published today.
The IMF now expects global growth of 3.1% in 2026, a 0.2 percentage point downgrade from its January forecast. But the small revision assumes that the war will be “relatively short-lived.” Global inflation is seen rising to 4.4% in 2026.
Slowdown in growth and increase in inflation are expected to be particularly pronounced in emerging market and developing economies.
The IMF report stresses that downside risks dominate the outlook. “A longer or broader conflict, worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial‑intelligence‑driven productivity, or renewed trade tensions could significantly weaken growth and destabilize financial markets.
“Elevated public debt and eroding institutional credibility further heighten vulnerabilities. At the same time, activity could be lifted if productivity gains from AI materialize more rapidly or trade tensions ease on a sustained basis.”
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