Published On 7/8/2026
The International Monetary Fund reduced its forecast for global economic growth in 2026 to 3%, compared to 3.1% in April estimates, considering that the global economy is moving between the pressure of the war in the Middle East on energy, trade and inflation, and partial support from the boom in artificial intelligence and technology chains.
In the July 2026 update to the World Economic Outlook report, the Fund expected that the world’s economic growth would recover to 3.4% in 2027, but it would remain below the average of 3.5% recorded in 2024 and 2025, indicating that the current shock has not turned into a global recession, but has weakened the recovery momentum.
The Fund said that the global economy withstood the shock of war better than expected, as economies linked to the global technology cycle, especially artificial intelligence and semiconductors, compensated for part of the impact of rising energy prices and supply disruptions, but it indicated that the gains are concentrated in specific countries, while energy importing countries, which are not linked to technology chains, are exposed to greater pressure.
Energy stops disinflation
The IMF raised its forecast for global inflation in 2026 to 4.7%, compared to 4.1% in 2025, before declining to 3.9% in 2027, indicating that the path of reducing inflation that has been ongoing since the beginning of 2024 has stopped with the rise in energy and food prices.
According to the report, energy prices are still about 25% higher than pre-war levels, despite their decline from April peaks. The Fund also expected oil prices to rise by 31.8% in 2026, before falling by 11.8% in 2027, while gas markets reflect a greater discrepancy. LNG prices have risen by about 50% in Asia and 25% in Europe since the start of the war, compared to an increase of only about 10% in American Henry Hub prices.
The Fund bases its expectations on the assumption of a gradual return to energy flows through the Strait of Hormuz, after the withdrawal of commercial and strategic oil reserves contributed to containing part of the supply shortage. But he warned that renewed escalation in the Middle East could restore commodity price volatility, put pressure on supply chains, raise prices, and tighten financial conditions.
The Middle East is the most affected
The Middle East and Central Asia region was the most affected in the Fund’s forecasts, as it reduced its growth estimates to 0.7% in 2026, before an expected recovery to 6.5% in 2027, a path linked to the assumption of a longer closure of the Strait of Hormuz compared to April estimates, and then a greater rebound with the return of movement.
The Fund expected that commodity-producing economies, such as Iraq, Kuwait, and Qatar, would witness sharp contractions in 2026 due to disruptions in energy production and transportation, before strong expansions in 2027. As for Saudi Arabia, the Fund sees it as relatively less affected thanks to the diversification of export paths, expecting it to grow by 1.7% in 2026 and 5.5% in 2027.
On the other hand, the Fund kept its expectations for the growth of the US economy at 2.3% in 2026, and raised its 2027 expectations to 2.2%, while lowering the Eurozone’s expectations to 0.9% in 2026. It also expected China to grow by 4.6% in 2026, and India by 6.4%, with performance continuing to vary between major economies according to the degree of exposure to energy and technology.
Trade slowdown
The IMF expects global trade growth to slow to 3.5% in 2026, from 5% in 2025, before recovering to 4.3% in 2027. This is linked to continued tariff pressures and the reorientation of production and trade chains.
The report warned of other risks, including accelerating fragmentation of global trade, declining fiscal policy margins, and the possibility of a correction in market expectations related to artificial intelligence if large investments in technology do not turn into tangible productivity gains.
The IMF called on policymakers to maintain price stability and the independence of central banks, avoid broad support and untargeted tax cuts, while limiting any support to temporary measures directed at the most fragile families and viable companies, in addition to rebuilding financial margins, enhancing energy security, and preparing for artificial intelligence.
