IMF Upgrades 2026 Growth Forecast but Warns of ‘Split’ Outlook

In its World Economic Outlook (WEO) released at the organization’s Annual Meetings in Bangkok, the IMF raised its 2026 global growth forecast by 0.1 percentage points to 3.1 percent, compared with 3.5 percent growth in 2025.

It warned that while many advanced economies have been buoyed by rising investment in artificial intelligence (AI) technology, poorer countries that are not benefiting from that boom face stark choices as they deal with high energy prices caused by the Iran war.

“The global economy has been resilient, but that resilience is under strain, with risks tilted to the downside,” Silvana Tenreyro, the IMF’s chief economist, told journalists in Bangkok.

With global debt-to-GDP ratios at sky-high levels, including in advanced economies, the IMF has called on governments to cut spending and manage borrowing -- a difficult task for those in the developing world struggling with the Iran war shock. 

“What we are advocating for is for policymakers to balance the near-term needs of inflation, and that involves food security, that involves energy security... while also keeping in mind the medium-term stability,” said Deniz Igan, chief of the IMF’s World Economic Studies division.

The United States’ war on Iran, launched in February, has plunged the Middle East into violence and seen global energy prices skyrocket as a result of Tehran’s retaliation.

Prices of refined petroleum products remain between 70 and 95 percent above pre-war levels, putting pressure on countries dependent on energy imports for economic activity.

“A more prolonged disruption of production and transport in the Middle East could lead to” higher inflation and a drag on growth, said Tenreyro.

Energy-importing countries not exposed to the AI boom remain the most vulnerable, creating what the IMF termed a “bifurcated outlook” in its WEO report.

The report detailed that the twin economic forces of the war in Iran and the AI technology boom had created a “fragmented” world economy.

“Headwinds from a prolonged war and persistent geopolitical tensions could revive inflationary pressures, strain fiscal and external positions, and hit energy-importing and low-income countries hardest,” it said.