The International Monetary Fund (IMF) has lowered its global economic growth forecast to 3.0 per cent for 2026, down from 3.1 per cent in its April 2026 forecast.
In its July World Economic Outlook update released on Wednesday, the IMF said global growth is projected to be 3.0 per cent in 2026 and 3.4 per cent in 2027, below the average annual growth of 3.5 per cent recorded in 2024 and 2025.
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The slight slowdown in global economic growth reflects the economic impact of the war in the Middle East, although part of the effect has been offset by stronger demand driven by advances in artificial intelligence, according to the IMF.
The Fund said the impact varies significantly across countries, depending on their exposure to the conflict and their position in the global technology value chain.
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It noted that energy-exporting countries outside the conflict zone have benefited from improved terms of trade, while economies integrated into the AI-driven technology boom have recorded stronger economic activity, even when they are net energy importers.
“The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle, thanks to advances in artificial intelligence (AI) and its adoption. The impact varies widely based on countries’ exposure to the war and position in the technology value chain.
“Energy exporters outside the conflict zone benefit from favourable terms of trade, whereas economies plugged into the technology-led upturn experience stronger activity even if they are energy importers,” the financial institution said.
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However, the IMF said growth prospects remain weak for many developing economies, noting that activity is weakening among energy importers with limited participation in the technology value chain, a group that includes many low-income countries.
For Nigeria, as reported in April, the report maintained its prediction that the economy will grow by 4.1 per cent in 2026 and 4.3 per cent in 2027, up from the 4.0 per cent projected in 2025.
Global inflation
The IMF also warned that global inflation is expected to rise before easing, predicting that headline inflation will increase from 4.1 per cent in 2025 to 4.7 per cent in 2026, then decline to 3.9 per cent in 2027.
It noted that the latest figures represent an upward revision from its April outlook, signalling that the disinflation trend in place since the beginning of 2024 has stalled.”
IMF warns
While risks to the global economy have become more balanced since April, the IMF said they remain tilted to the downside.
The report warned that the possibility of renewed Middle East conflict looms large and could extend commodity price volatility, further threaten supply chains, raise prices, and weigh on financial conditions.
“The possibility of renewed Middle East conflict looms large and could extend commodity price volatility, further threaten supply chains, raise prices, and weigh on financial conditions,” the IMF said.
Meanwhile, US President Donald Trump on Wednesday declared the ceasefire with Iran ‘over’ after fresh hostilities erupted again in the region.
The conflict began on 28 February, when the US/Israeli strikes on Iran triggered a wider regional war. The two sides later signed a ceasefire agreement on 17 June, creating a window for negotiations before the truce collapsed.
IMF cautioned that growing trade fragmentation could further weaken economic output and push prices higher. It added that a possible correction in technology-driven market expectations and shrinking policy buffers could amplify downside risks.
On the upside, the IMF said faster normalisation in energy markets, stronger-than-expected investment in technology, renewed international cooperation that lowers trade barriers, and structural reforms could lift medium-term growth.
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Despite heightened geopolitical tensions, the IMF said the global economy has remained more resilient than expected, with the impact on commodity prices, inflation expectations, and financial conditions so far relatively limited.
It warned that the full effects of the conflict have yet to materialise, as early indicators point to softer global economic momentum and increasing pressure on some countries.
The Fund urged policymakers to prioritise restoring price stability through clear communication, central bank independence, and strong financial supervision.
IMF advised the countries’ leaders to rebuild fiscal buffers and limit fiscal support to temporary, targeted measures that preserve market price signals.
The financial institution also called for structural reforms to strengthen energy security, improve AI readiness, support domestic economic rebalancing, and reinforce international cooperation amid rising geopolitical tensions.
“Global economic activity and the outlook are being shaped by two major forces, pushing in opposite directions with asymmetric effects across countries.
“First is the negative supply shock induced by the war in the Middle East. Second is the ongoing positive technology shock manifesting in accelerated momentum of the global technology cycle, in no small part driven by advances in and deployment of artificial intelligence (AI) tools,” the Fund said.
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