Delegates walk towards the entrance of the IMF headquarters during the World Bank/IMF Spring Meeting in Washington on April 15, 2026. (Jose Luis Magaña/AP/File)
key takeaways:
- The IMF on July 8 cut its 2026 global growth forecast to 3% from 3.1%, citing energy disruptions from the Iran conflict.
- Higher oil prices, expected to rise by about 32%, are pushing inflation to 4.7% and putting pressure on economies, although AI investment is offsetting some of the effects.
- The US is projected to grow at 2.3% while Europe’s growth rate will slow to 0.9%, with China and India supported by policy stimulus and strong domestic demand.
WASHINGTON – The International Monetary Fund on July 8 modestly downgraded its outlook for the world economy this year, citing the energy shock caused by the Iran war.
But the consequences of the conflict are being partly offset by increasing investment in artificial intelligence and other technologies.
The IMF now expects the global economy to grow at a slower pace of 3% in 2026, down from forecasts of 3.5% last year and 3.1% in April this year.
Iran responded to the US and Israeli attacks on February 28 by closing the Strait of Hormuz, through which a fifth of the world’s crude oil and natural gas passes.
Energy prices rose, putting pressure on businesses and consumers. The IMF now expects oil prices to rise by about 32% this year and global consumer prices to rise by 4.7% in 2026. That will top 4.1% in 2025 and mean two years of progress against inflation has stalled.
Countries that produce and export their own energy and benefit from AI investments are spared the economic damage of war. The United States is also included in these. The IMF expects the US economy – the world’s largest – to grow a solid 2.3% this year, up from 2.1% in 2025 and unchanged from its April forecast. President Donald Trump’s 2025 tax cuts, big gains in productivity and a strong stock market are also boosting the US economy.
Updated IMF growth forecast for 2026:
🇺🇸 US: 2.3%
🇩🇪 Germany: 0.7%
🇫🇷 France: 0.6%
🇬🇧 UK: 1.0%
🇨🇳 China: 4.6%
🇯🇵Japan: 0.6%
🇮🇳 India: 6.4%
🇷🇺Russia: 1.1%
🇧🇷 Brazil: 2.4%
🇸🇦 Saudi Arabia: 1.7%
🇳🇬 Nigeria: 4.1%Explore complete estimates: https://t.co/EWThm8NLlj pic.twitter.com/0ypjx81oHn
– IMF (@IMFNews) 8 July 2026
The 21 European countries that share the euro currency have been hit hard by high energy prices, collectively projected to grow just 0.9% this year, down from 1.4% in 2025.
China, the world’s No. 2 economy, is expected to expand 4.6% this year, down from 5% in 2026, but slightly faster than the IMF expected in April. The Chinese economy is being supported by public works spending, increased high-tech manufacturing and booming exports, amid high energy prices and a depressed property market.
India is once again projected to become the world’s fastest growing major economy, growing at a 6.4% clip (down from 7.7% last year) due to strong consumer spending.
The IMF is a lending organization of 191 countries that works to promote economic growth and financial stability and reduce global poverty.
