IMF Warns Prolonged War Could Weaken Global Growth Further

what happened

Newsmetry API reports that the International Monetary Fund left its baseline forecast for global growth at 3.1% this year. That would be down from 3.5% in 2025 but still relatively solid given the energy shock triggered by the war in the Middle East. Global headline inflation is expected to reach 4.7%, compared with 4.1% last year.

Assuming energy flows gradually normalize, the U.S. economy is projected to expand 2.3% in both 2026 and 2027. The IMF’s outlooks for the eurozone and the U.K. are broadly unchanged. But a longer war, higher commodity prices and increased borrowing costs would result in materially weaker global growth and substantially hotter inflation.

The fund estimates that global growth would be reduced by 0.2 percentage point in 2026 and 0.5 percentage point in 2027 if higher commodity prices coincide with a loss of fiscal and monetary credibility. Around two-thirds of the damage would stem from lasting disruption to oil and gas markets. Higher energy costs would also lift inflation, which could be 1.1 percentage points higher in 2027.

IMF chief economist Silvana Tenreyro said governments should put public debt on a durable path and rebuild fiscal buffers. Monetary policy, she said, must remain focused on price stability, with rates restrictive enough to bring inflation back to target. The fund added that AI-related investment is cushioning some economies but making global growth more dependent on a narrow set of technological and financial conditions.

why it matters

For markets, the outlook keeps oil and gas prices, bond yields and expectations for additional rate increases in focus. The uneven distribution of growth also raises the importance of inflation, commodity and AI-investment data.

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