IMF Cuts the Outlook for Global Growth in the Fallout from Iran War

  • The International Monetary Fund released its World Economic Outlook (WEO) on April 14, 2026, titled "Global Economy in the Shadow of War". It warned that the outbreak of war in the Middle East at the end of February 2026 has significantly threatened global economic momentum.
  • Under the IMF's reference forecast1, global growth is projected to reach 3.1% in 2026 and 3.2% in 2027. This is down from 3.4% in 2024-25 and well below the historical average of 3.7% from 2000-2019. The forecast for 2026 is revised downward by 0.2 percentage points and that for 2027 is unchanged, compared with those in the January 2026 WEO Update.
  • Additionally, global headline inflation is expected to increase to 4.4% in 2026 and decline to 3.7% in 2027, marking upward revisions for both years.
  • Absent the war, global growth would have been revised upward. Forecasts based on pre-conflict assumptions would have shown a slight upward revision of 2026 growth relative to that forecasted in the January WEO Update, by 0.1 percentage point to 3.4%. Hence, the downward revision for 2026 largely reflects the disruptions from the conflict in the Middle East, partly offset by carryover from recent strong data and reduced tariff rates.
  • The impact is far from equal across countries. Emerging markets and developing economies face a 0.3 percentage point downward revision to growth, while advanced economies are largely unchanged. The impact on commodity-importing developing nations with pre-existing financial fragilities is described as being much more pronounced".
  • In a severe scenario where energy infrastructure in the conflict region suffers significant damage, global growth could collapse to 2.0% in 2026 with inflation rising above 6.0% by 2027. The blow to emerging and developing economies would be nearly twice that felt by advanced economies.
  • The IMF called on central banks to remain vigilant against supply shocks destabilising inflation expectations. Governments are being urged to keep any fiscal support targeted and temporary, while countries should cooperate to restore stability in international trade and economic relations.

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1This assumes the war will be short-lived and disruptions will fade by mid-2026.

(Source: IMF)