IMF lowers 2026 world growth forecast as West Asia risks linger

Published 8 July 2026 · india

The International Monetary Fund (IMF) on Wednesday (July 8, 2026) cut its 2026 growth projection for the world economy again, saying an AI boom has

The International Monetary Fund (IMF) on Wednesday (July 8, 2026) cut its 2026 growth projection for the world economy again, saying an AI boom has not fully offset the fallout from the war in the West Asia. Global economic growth is now estimated at 3% this year, IMF said, down from 3.1% in its April forecast. The estimate was made before fresh exchanges of fire between the United States and Iran in recent hours. It is the second time this year that the fund has lowered its overall growth expectations. The latest estimate marks a cooling from the 2025 growth rate as well. Global inflation meanwhile, is anticipated to accelerate to 4.7% this year, a higher level than earlier projected. Still, the overall growth slowdown is modest, as momentum in artificial intelligence -- driven by demand -- partially offsets the effects of the war. The IMF said it expects global growth to pick up in 2027 to 3.4%. Deniz Igan, division chief at the IMF's research department, told AFP that its forecasts are "broadly unchanged" cumulatively for the next two years and described the bounceback as "a V-shaped recovery." The delayed recovery from war on Iran, longer disruptions and higher prices is part of the reason the world economy will take a bigger hit this year, she added.

West Asia war LIVE The IMF flagged that fallout varies widely. "Energy exporters outside the conflict zone benefit from favorable terms of trade, whereas economies plugged into the technology-led upturn experience stronger activity even if they are energy importers," the fund said. "In contrast, activity weakens for energy importers with limited participation in the technology value chain," it added. U.S.-Israeli strikes targeting Iran since February 28 have sparked Tehran's retaliation in virtually blocking off the Strait of Hormuz, while plunging the West Asia into war. As traffic stalled in the key waterway for energy transit, global oil prices soared -- weighing on economies. Oil and gas shipments resumed as a temporary U.S.-Iran deal paused hostilities, but temperatures are again rising. Igan -- speaking before hostilities resumed, sparked by Iranian attacks on ships in the strait -- said she expected the normalization of traffic through the waterway by 2027. Glaring differences Although the world economy has weathered the shock from the war so far better than feared, the IMF warned: "The global picture blurs glaring differences across countries." Retail gasoline costs jumped by 30% in emerging Asia after the onset of war, and only by 15% in Latin America.