IMF's global growth outlook improves, but Iran war threatens to leave poorer nations behind
The IMF has raised its 2026 global growth forecast to 3.1%, but warns the Iran war and soaring energy prices threaten poorer nations as AI fuels growth elsewhere.
The International Monetary Fund (IMF) has raised its 2026 global growth forecast to 3.1 percent, down from the 3.5 percent projected for 2025. The improvement is attributed to advanced economies' resilience in the face of energy price increases driven by the Iran war. However, the IMF warns that low-income countries remain vulnerable to the supply shock, creating a "bifurcated" world economy.
The Middle East and Central Asia region, directly affected by the Iran war, is expected to contract by 0.3 percent in 2026. Saudi Arabia, for example, is projected to shrink by 3.3 percent, a significant 5.0 percentage point reduction from the IMF's earlier forecast. These countries face high energy prices caused by the war and struggle with high global debt-to-GDP ratios.
In contrast, advanced economies, buoyed by rising investment in artificial intelligence (AI) technology, are expected to grow 2.1 percent in 2026. Countries like Taiwan and South Korea, integral to the AI supply chain, are projected to experience higher growth. China, the world's second-largest economy, is expected to slow due to weak domestic demand.
IMF Chief Economist Silvana Tenreyro stated that while the global economy is resilient, that resilience is under strain, with risks tilted to the downside. IMF Managing Director Kristalina Georgieva emphasized that the world now values security considerations in addition to economic efficiency. The IMF advocates for policymakers to balance near-term inflation needs with long-term stability, while also addressing food and energy security.
Written by urgent.news from IOL's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
