The International Monetary Fund trimmed its 2026 global growth forecast to 3.0% on Wednesday and raised its global headline inflation projection to 4.7%, warning that the war in the Middle East has stalled the disinflation trend that had been in place since early 2024.
Looking ahead, the IMF lifted its 2027 global growth estimate to 3.4%, a half-percentage-point upgrade from its April forecast of 3.2%, though that pace would still trail the 3.5% average the world economy sustained over the prior two years. The 2026 growth figure is down 0.1 percentage point from the fund's April projection of 3.1%.
On the price side, the IMF now sees headline inflation climbing to 4.7% this year, up from 4.1% in 2025, and then retreating to 3.9% in 2027. Compared with April, the 2026 inflation estimate was marked up by 0.3 percentage points, a revision the fund attributed chiefly to surging energy and food costs. Crude oil has not retreated far from its wartime highs — the IMF noted that energy prices are running about 25% above what they were before the conflict began, with the fund penciling in an average of $89 per barrel for 2026.
Artificial intelligence investment has cushioned the blow of the conflict, the IMF said, with technology-driven demand providing enough lift to keep the overall global economy from a sharper deterioration than forecasters had feared. Output in the opening three months of 2026 expanded at an annualized 3.0%, topping the 2.7% pace the fund had penciled in during its April round of forecasts.
The outlook is sharply uneven. The clearest winners were countries whose manufacturers sit at the center of the AI hardware supply chain; Taiwan, South Korea, Thailand, and Malaysia — the quartet that dominates exports of AI-related components — all posted results that surpassed the IMF's earlier expectations. South Korea was the standout, with annualized first-quarter GDP growth clocking in at 7.5% — a figure the IMF described as remarkable given the country's heavy dependence on Middle Eastern energy imports and nearly four times the 1.8% the fund had expected. Countries that import energy but lack exposure to the technology supply chain, including many low-income nations, face the sharpest downgrades.
In the Middle East and Central Asia, growth is projected to drop to 0.7% in 2026 before rebounding to 6.5% in 2027. The IMF slashed Saudi Arabia's 2026 growth estimate by 1.4 percentage points, leaving it at just 1.7%, down from 3.1% in the prior forecast. Underpinning the IMF's numbers is an assumption that shipping through the Strait of Hormuz gradually normalizes starting in mid-July, with full prewar conditions restored by March 2027.
The IMF's update arrives as the ceasefire between the United States and Iran faces new pressure. After Iranian forces struck merchant vessels transiting the Strait of Hormuz, Washington responded with new military action against Iran. President Trump declared Wednesday that the ceasefire, in his view, was finished. The IMF report was finalized before those developments.
The IMF's downgrade follows a warning from the World Bank, which cut its own 2026 global growth forecast to 2.5%, calling the slowdown the worst hit to the global economy since the COVID-19 pandemic, as soaring energy prices fueled a new wave of inflation.
The IMF urged policymakers to keep monetary policy focused on restoring price stability, rebuild fiscal buffers, and avoid broad-based subsidies or price controls that could distort markets.