Friday, 17 April 2026
The International Monetary Fund has lowered its global growth expectations for 2026, citing the ongoing conflict in the Middle East and its impact on energy markets, trade flows and investor sentiment.
In its latest World Economic Outlook update, the IMF now forecasts global GDP growth at 3.1% in 2026, a downward revision of 0.2 percentage points compared to its January outlook, while maintaining its 3.2% projection for 2027.
The revision reflects a combination of offsetting factors. While lower tariffs, continued policy support and stronger-than-expected economic performance at the end of 2025 provided some resilience, these gains were partially outweighed by the economic consequences of the conflict and associated disruptions in energy supply chains.
The IMF warned that risks remain tilted to the downside. In a more severe scenario, global growth could fall close to recession levels, declining by 1.3 percentage points in 2026, accompanied by a sharp rise in inflation.
Energy markets remain central to the outlook. Oil prices are expected to average just above $82 per barrel in 2026, supported by supply disruptions linked to transport constraints and reduced flows through key routes such as the Strait of Hormuz. Gas markets are expected to experience even greater volatility due to limited alternative supply capacity.
Diverging regional impacts
Advanced economies are projected to grow by 1.8% in 2026, easing slightly to 1.7% in 2027, with relatively limited direct exposure to the conflict. However, energy-importing regions, including Europe, are expected to face more persistent pressure from higher costs and currency effects.
The euro area is forecast to expand by 1.1% in 2026, reflecting weaker industrial performance and elevated energy prices, before a modest recovery in 2027. The United Kingdom is expected to slow more sharply, with growth declining to 0.8% in 2026 before recovering the following year.
Emerging markets are expected to experience a more pronounced impact. Growth projections for developing economies were revised down to 3.9% in 2026, reflecting their higher exposure to commodity price volatility and external financing conditions.
The Middle East and North Africa region faces the most significant downgrade. Growth expectations for 2026 have been cut to 1.1%, primarily due to lower output among oil-exporting countries and infrastructure disruptions. A rebound to 4.8% is projected for 2027, assuming a stabilisation of production and transport conditions.
Inflation and trade outlook
Global inflation is expected to rise to 4.4% in 2026, driven largely by higher energy and food prices, before easing to 3.7% in 2027.
Despite these pressures, global trade is projected to remain relatively resilient, with volumes expected to grow by 2.8% in 2026 and 3.8% in 2027, supported by adjustments in supply chains and front-loaded shipments.
Outlook remains conditional
The IMF notes that the baseline scenario assumes a gradual normalisation of energy production and transport routes. However, the outlook remains highly sensitive to geopolitical developments, particularly in energy markets.
Should disruptions persist or intensify, both growth and inflation trajectories could shift materially, with emerging markets expected to bear a disproportionate share of the downside risk.
Source: Kamco Invest
