IMF Cuts 2026 Growth Forecast to 3%, Warns of War Risks
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- IMF cut its 2026 global growth forecast to 3.0% from 3.1% in April and projects a rebound to 3.4% in 2027 — still below the 3.5% average seen in 2024–2025.
- Headline inflation was raised to 4.7% for 2026 (up 0.3 percentage points from April), with energy prices running 25% higher than before the war began on February 28, according to the report.
- Forecast assumptions include the Strait of Hormuz reopening in mid-July with traffic normalizing by March 2027, and an average oil price of $89 per barrel.
- Global trade growth is projected to slow sharply to 3.5% in 2026 from 5% in 2025 — a year the IMF attributed to heavy front-loading ahead of U.S. tariffs — before rebounding to 4.3% in 2027.
- Country-level revisions included China upgraded to 4.6% growth in 2026 (from 4.4%), the Middle East and Central Asia region cut 1.2 percentage points to 0.7%, the euro area lowered to 0.9% (from 1.1%), and South Korea raised 0.7 points to 2.6% on AI hardware exports.
- Deniz Igan, who leads the IMF's economic-update work, warned that a renewed Middle East conflict would 'catch the global economy in a worse position' because many countries have already drawn down oil reserves.
- Petya Koeva Brooks, the IMF's deputy director of research, described a 'V-shaped recovery,' saying the world economy 'weathered the shock from the war better than feared' with limited second-round effects so far.
Why it matters: The IMF's baseline now depends on the Strait of Hormuz reopening mid-July and oil averaging $89 — assumptions that Trump's declaration that the Iran ceasefire is 'over' and renewed US strikes on 80+ targets directly jeopardize. With countries having already drawn down strategic reserves, Igan warned a second escalation would hit a global economy with less buffer to absorb the shock.
