IMF Keeps 2026 Growth Forecast Largely Unchanged

The IMF kept its 2026 global growth forecast virtually unchanged at 3%, just 0.1 percentage point below its April projection, citing the world economy’s stronger-than-expected resilience to the Iran war and robust AI-related investment, according to its July 2026 World Economic Outlook. The 2027 growth outlook was revised upward to 3.4% from 3.2%. Despite the slight upgrades, the IMF warned that risks remain tilted to the downside, and the full economic impact of elevated tensions, including renewed US-Iran strikes, may still take time to materialize. Global headline inflation is now expected to reach 4.7% in 2026, up from 4.1% in 2025, before easing to 3.9% in 2027. The IMF projects growth of 2.3% for the US in 2026 and 2.2% in 2027, while China is expected to expand by 4.6% and 4.1%, respectively. India’s growth is forecast at 6.4% in 2026 and 6.7% in 2027, Japan at 0.6% and 0.7%, the Eurozone at 0.9% and 1.2%, and the UK at 1.0% and 1.3%.

The OECD lowered its global growth forecasts for this year to 2.8% from 3.4%, while keeping the projection for 2027 steady at 3.1%. The agency noted that the duration and extent of the conflict in the Middle East remain uncertain, but the economic effects are likely to be felt for some time given the months it will take to restore damaged infrastructure and transport routes and deliver products around the world. Growth is set to slow modestly in North America and Europe before a tentative recovery, with the US easing to 2% in 2026 and 1.8% in 2027, Canada dipping to 1.2% before rebounding to 1.7%, Mexico strengthening to 1.9% by 2027, the UK from 0.9% to 1.1%, while China moderates steadily to 4.5% in 2026 and 4.3% in 2027. In addition, the OECD noted that higher energy prices, supply shortages, tighter financial conditions and weaker confidence would weigh on activity worldwide. Inflation would also intensify, rising by around 0.4 pp in 2026 and 1.3 pp in 2027.

The IMF has revised its 2026 global growth forecast downward to 3.1%, a 0.2 percentage-point cut from previous expectations, while maintaining the 2027 outlook at 3.2%, reflecting the economic fallout from the ongoing Middle East conflict. Although the baseline scenario assumes a contained conflict, the IMF warns that prolonged hostilities could further weaken the global economy and destabilize financial markets. It also noted that energy supply shock from the Iran conflict is comparable in severity to the 1974 oil crisis, though the global economy is now more resilient. By region, the US economy is expected to grow by 2.3% in 2026 and 2.1% in 2027. China’s growth is forecast to slow to 4.4% and 4.0%, respectively. The Euro Area is projected to expand by just 1.1% in 2026 and 1.2% in 2027, while the UK and Japan face similarly modest growth of 0.8% and 0.7% in 2026, compared to 1.3% and 0.6% in 2027. Global inflation is expected to rise modestly in 2026 before declining again in 2027.