Published Wed, Jul 8, 2026 · 11:15 PM

[WASHINGTON] The International Monetary Fund (IMF) on Wednesday (Jul 8) inched its 2026 global growth forecast lower again to 3.0 per cent, warning of ongoing risks posed by the war in the Middle East, trade fragmentation and potential corrections in market expectations for AI.

The global lender said the world economy had dodged a sharper downturn as a result of the war, with demand-driven momentum in the tech sector helping to offset a war-related drop in energy supplies. Growth should rebound to 3.4 per cent in 2027, but that is still below the average of 3.5 per cent seen in 2024 and 2025.

The IMF raised its 2026 headline inflation forecast by 0.3 percentage points to 4.7 per cent from April, but said it should drop to 3.9 per cent next year. Energy prices were 25 per cent higher now than before the war began on February 28 and would remain higher, it said. The new forecast assumes the Strait of Hormuz will start to reopen in mid-July, reaching prewar conditions by March 2027.

“The global economy as a whole has, so far, weathered the shock from the war better than feared,” the IMF said in an update to its World Economic Outlook, noting the outlook was brighter for energy exporters and countries that are closely integrated into the technology sector, while commodity importers that are not well-positioned to benefit from AI developments generally saw downgrades in their growth forecasts.

Growth in global trade was projected to slow sharply to 3.5 per cent in 2026 from 5 per cent in 2025, a year marked by heavy front-loading ahead of US tariffs, before rebounding to 4.3 per cent in 2027.

Deniz Igan, chief of the IMF Research Department’s World Economic Studies division, said the global economy was proving more resilient than expected in April, despite the impact of the war and the closure of the Strait of Hormuz.

Prices were higher, confidence was down, but the release of strategic oil reserves and commercial inventories – along with rising energy efficiency – had helped to offset supply shortages.

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