The International Monetary Fund (IMF) has raised its 2026 global growth forecast to 3.1 per cent, citing gains from artificial intelligence (AI) investment despite the Middle East conflict.
In its latest World Economic Outlook, titled “Resilience under Strain, Urgent Choices”, the fund projected 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 remained unchanged from July but was 0.2 percentage points higher than the April estimate. However, the IMF said growth was becoming increasingly concentrated, with 32 economies accounting for 95 per cent of global growth, while about 47 per cent of economies had their forecasts downgraded.
The fund attributed the uneven outlook to countries’ exposure to energy supply disruptions and their links to AI-related demand. Economies connected to AI hardware supply chains were performing better, while energy-importing countries with limited technology links, including many low-income nations, faced higher import costs, weaker currencies and declining real incomes.
The IMF’s baseline forecast assumes the Strait of Hormuz will reopen in March 2027, with conditions broadly returning to pre-war levels by October 2027. The waterway previously handled about a quarter of global seaborne oil trade.
The fund estimated that the closure would have reduced global growth by 0.9 percentage points in 2026 without alternative supply responses. However, redirected Gulf oil supplies, increased production elsewhere, inventory withdrawals and lower oil intensity limited the estimated impact to about 0.3 percentage points.
Saudi Arabia’s 2026 growth outlook was revised down by five percentage points from the July projection to a contraction of 3.3 per cent. Bahrain, Iraq, Kuwait and Qatar were also expected to record double-digit economic contractions amid disruptions to energy production and transportation.
The IMF warned that global oil inventories were approaching critical levels, increasing the risk of sharp price rises. Oil prices were projected to average $95.74 per barrel in 2026, about 41 per cent above the 2025 average, before falling to $87.39 in 2027.
Global headline inflation was forecast to rise from 4.1 per cent in 2025 to 4.7 per cent in 2026 before easing to 4.1 per cent in 2027. The fund also raised its inflation forecasts for both years compared with its April projections.
Among major economies, the United States was projected to grow by 2.3 per cent in both 2026 and 2027, supported by consumer spending, fiscal policy and technology investment.
The euro area was expected to grow by 1.1 per cent in 2026 and 1.2 per cent in 2027, reflecting high energy prices and weak consumer confidence.
India’s economy was projected to grow by 7.0 per cent in both years, while Japan’s growth was forecast at 0.7 per cent and Britain’s at 1.3 per cent in 2026.
The IMF said core inflation was not expected to return to 2 per cent until the end of 2027 in Japan and Britain, and mid-2028 in the euro area and the United States.
