IMF warns Middle East conflict risks slowing global growth to 3.1% in 2026

The global economy faces renewed risks from the Middle East conflict, which could disrupt growth, inflation, and financial conditions, the International Monetary Fund (IMF) said in its latest World Economic Outlook on Tuesday.

The IMF projected global growth at 3.1 per cent in 2026 and 3.2 per cent in 2027, down from about 3.4 per cent in 2024–25 and below the historical average of 3.7 per cent, citing rising geopolitical uncertainty and lingering trade tensions.

The Fund said the outbreak of war in the Middle East in early 2026 has partially reversed earlier improvements in global conditions, including easing inflation pressures, stronger technology investment, and more accommodative financial conditions.

Global inflation is expected to rise to 4.4 per cent in 2026 before easing to 3.7 per cent in 2027, reflecting the impact of higher commodity prices and tighter financial conditions linked to the conflict.

“The Middle East conflict presents a significant counterforce to these tailwinds through its impact on commodity markets, inflation expectations, and financial conditions.” the IMF said.

The IMF used a “reference forecast” instead of a traditional baseline, assuming the war remains limited in duration and intensity and fades by mid-2026, broadly in line with commodity futures pricing.

However, it warned that downside risks increase if the conflict persists or widens, with alternative scenarios showing deeper disruptions to global activity.

The Fund said that without the conflict, global growth would have been revised slightly higher, underscoring the extent to which geopolitical tensions are now shaping the economic outlook.

Attribution: Amwal Al Ghad English