The International Monetary Fund (IMF) announced this week a downward revision of its 2026 global economic growth forecast compared to its April projections, citing the ongoing war in Iran.

The fund now expects global growth to reach 3.0 per cent, down from the 3.1 per cent it had anticipated in April 2026.

Conversely, the IMF has upgraded its 2027 global growth forecast to 3.4 per cent from the 3.2 per cent projected last April, while simultaneously raising its global inflation forecast for 2026 to 4.7 per cent.

The moderate slowdown in growth reflects the consequences of the war in the Middle East, which have been partially offset by the accelerating momentum stemming from demand in the global technology cycle, due to developments in artificial intelligence and its adoption, the IMF noted in its July 2026 World Economic Outlook (WEO) report.

According to the IMF, the impact varies significantly depending on each country’s exposure to the war and its position in the technology value chain.

Energy-exporting countries outside the conflict zone are benefiting from favourable terms of trade, while economies linked to the tech-driven recovery are experiencing stronger activity, even if they are energy importers, the report noted.

Conversely, activity is weakening for energy importers with limited participation in the technology value chain, a group that includes many low-income countries, according to the fund.

Regarding the US economy, the IMF maintained its 2026 growth forecast at 2.3 per cent and upgraded its 2027 projection to 2.2 per cent compared to the figures released last April.

For the eurozone, the IMF downgraded its growth forecast in the July WEO to 0.9 per cent from the 1.1 per cent expected in April, while maintaining its 2027 growth forecast unchanged at 1.2 per cent.

In Germany, the fund now expects growth of 0.7 per cent in 2026, down from the 0.8 per cent projected in April, and 1 per cent for 2027, compared to the 1.2 per cent previously forecast.

For France, it expects 0.6 per cent growth in 2026, down from the 0.9 per cent anticipated in April, while it kept its 2027 growth forecast of 0.9 per cent unchanged.

In China, the IMF now expects growth of 4.6 per cent, up from 4.4 per cent expected last April, and anticipates 4.1 per cent growth in 2027, up from 4.0 per cent.

The fund also expects growth of 6.4 per cent for India in 2026, down from the 6.5 per cent projected in April, and 6.7 per cent in 2027, up from the 6.5 per cent forecast in April.

Global headline inflation is expected to increase from 4.1 per cent in 2025 to 4.7 per cent in 2026 before falling to 3.9 per cent in 2027, with the rise in 2026 inflation driven by higher energy and food prices.

The slightly upwardly revised inflation forecasts compared to April indicate that the disinflationary trend in place since the beginning of 2024 has stalled.

The risks to the outlook are more balanced than they were in April, but they still lean to the downside, the fund highlighted.

The IMF’s projections assume that the opening of the Strait of Hormuz begins in mid-July, with conditions generally returning to the pre-war status by March 2027 and with serious energy shortages avoided through further stock drawdowns.

The fund predicts that energy prices will remain higher than they were before the war, with the average spot price of oil amounting to 89 dollars per barrel, 9 per cent higher than the forecast in the April 2026 WEO.

Additionally, the IMF estimates that natural gas prices, based on Dutch TTF futures contracts, will be 15 dollars or 5 per cent higher than the forecast from last April.

This corresponds to a 32 per cent increase in crude oil prices and a 22 per cent increase in natural gas prices in 2026 compared to 2025, the report noted.

It also expects fertilizer prices to increase by 26 per cent.

Reflecting the higher cost of energy and fertilizers and more expensive transport, food prices are expected to rise by 8 per cent, the report emphasised.

The IMF noted that prices for basic commodities in various countries may deviate from the global benchmark.