The International Monetary Fund (IMF) has lowered its 2026 global growth forecast to 3.0%, citing ongoing risks from the war in the Middle East, trade fragmentation, and potential corrections in market expectations for artificial intelligence (AI). The global lender noted that the world economy has 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.

Global Growth Forecast

The IMF raised its 2026 headline inflation forecast by 0.3 percentage points to 4.7% from April, but said it should drop to 3.9% next year. Energy prices were 25% 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.

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.

Regional Growth Forecasts

The IMF left its 2026 growth forecast for the U.S. economy unchanged at 2.3% and raised its 2027 forecast by 0.1 percentage point to 2.2% from the April forecast. It lowered the 2026 growth forecast for the euro area to 0.9% from its previous forecast of 1.1% in April, and left its 2027 forecast unchanged at 1.2%.

Emerging market and developing economies also saw a 0.1 percentage point cut in their growth forecast to 3.8% in 2026, while the 2027 forecast was raised by 0.3 points to 4.5%. China’s growth was now expected to reach 4.6% in 2026, up from the April forecast of 4.4%, with 2027 growth expected to reach 4.1%, up from 4% in April.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.