IMF Hikes 2026 Global Economic Growth Estimate to 3.1%
The International Monetary Fund (IMF) says it has raised its 2026 global growth forecast to 3.1 per cent, citing AI investment gains in spite of the Middle East conflict.
In its latest World Economic Outlook, titled “Resilience under Strain, Urgent Choices”, the IMF projects global growth to slow from 3.5 per cent in 2025 to 3.1 per cent in 2026, before rising to 3.4 per cent in 2027.
The 2027 projection remains unchanged from the July forecast but is 0.2 percentage points higher than the April estimate.
The fund said global growth was becoming increasingly concentrated, with 32 economies accounting for 95 per cent of global growth, compared with 54 in April.
It added that about 47 per cent of economies had their growth forecasts downgraded.
According to the IMF, global growth is being redistributed rather than simply slowing or accelerating, depending on countries’ exposure to energy supply disruptions caused by the conflict and demand associated with artificial intelligence (AI).
The fund said economies with limited exposure to energy shocks and strong links to the AI hardware supply chain were performing better.
By contrast, energy-importing countries with limited links to the technology boom, including many low income nations, face higher import costs, weaker currencies and declining real incomes.
The IMF’s baseline projection assumes that the Strait of Hormuz will reopen in March 2027, with conditions broadly returning to pre-war levels by October 2027.
Before the conflict, the strait handled about a quarter of the world’s seaborne oil trade.
The fund estimated that the closure of the waterway would have reduced global growth by 0.9 percentage points in 2026 without alternative supply responses.
However, redirected Gulf oil supplies, increased production elsewhere, withdrawals from inventories and lower oil intensity in the global economy has limited the estimated impact to about 0.3 percentage points.
Saudi Arabia’s 2026 growth outlook had been revised downwards by five percentage points from the July projection, to a contraction of 3.3 per cent.
Meanwhile, Bahrain, Iraq, Kuwait and Qatar, which are major commodity producers affected by disruptions to energy production and transportation, are expected to record double-digit economic contractions this year.
The IMF warned that global oil inventories were declining towards critical levels, raising the risk of sharp price increases.
Oil prices are projected to average 95.74 US dollars per barrel in 2026, about 41 per cent higher than in 2025, before falling to 87.39 dollars per barrel in 2027.
Global headline inflation is forecast to raise from 4.1 per cent in 2025 to 4.7 per cent in 2026, before easing to 4.1 per cent in 2027.
Compared with its April projections, the fund raised its inflation forecasts by 0.3 percentage points for 2026 and 0.4 percentage points for 2027.
Core inflation is not expected to return to two per cent until the end of 2027 in Japan and Britain, and by mid-2028 in the euro area and the United States.
Among major economies, U.S. growth is projected at 2.3 per cent in both 2026 and 2027, supported by consumer spending, fiscal policy and technology investment.
The euro area is expected to grow by 1.1 per cent in 2026 and 1.2 per cent in 2027, reflecting the continued effects of high energy prices and weak consumer confidence.
India’s economy is projected to grow by 7.0 per cent in both years, while Japan’s growth is forecast at 0.7 per cent and Britain’s at 1.3 per cent in 2026. Global Equities Markets Rise as Oil Bear, AI Drive Risk Appetite
