The International Monetary Fund (IMF) has downgraded its forecast for global economic growth in 2026, warning that persistent geopolitical tensions in the Middle East and elevated energy prices continue to pose significant risks to the world economy despite the rapid expansion of artificial intelligence-driven industries.
In its latest global economic outlook released on Wednesday, the IMF projected the world economy will expand by 3.0 per cent in 2026, down from the 3.1 per cent forecast it issued in April. It marks the second downward revision by the Fund this year and signals a slight slowdown from the pace recorded in 2025.
The IMF also revised its global inflation forecast upward to 4.7 per cent this year, reflecting the impact of higher energy prices and supply disruptions linked to the conflict in the Middle East.
The report noted that while investment and demand linked to artificial intelligence have continued to support economic activity, those gains have not been sufficient to fully offset the economic fallout from the ongoing regional conflict.
According to the Fund, global growth is expected to rebound to 3.4 per cent in 2027, provided geopolitical tensions ease and energy markets stabilise.
Deniz Igan, Division Chief in the IMF’s Research Department, said the Fund’s medium-term projections remain broadly unchanged and described the expected recovery as “V-shaped.”
She explained that prolonged disruptions arising from the conflict involving Iran have delayed the global recovery, increasing pressure on inflation and slowing economic activity in several regions.
The IMF said energy-exporting economies outside the conflict zone are benefiting from stronger commodity prices, while countries with advanced technology industries continue to perform relatively well despite higher energy costs.
By contrast, energy-importing economies with limited exposure to the global technology supply chain are expected to record weaker growth because of higher import costs and slower industrial activity.
The United States is projected to grow by 2.3 per cent this year, while growth in the Middle East and Central Asia has been revised down to 0.7 per cent. The euro area is expected to expand by 0.9 per cent, with France forecast to grow 0.6 per cent. China’s outlook improved slightly to 4.6 per cent.
The IMF also highlighted the resilience of Taiwan, South Korea, Thailand and Malaysia, whose strong technology exports continue to support growth despite geopolitical uncertainty.
It warned that renewed conflict in the Middle East, supply chain disruptions, commodity price volatility and growing trade fragmentation remain significant risks to the global economic outlook, although it expects inflation to resume its downward trend over the medium term.
