IMF reduces global growth forecast to 3.0%

The International Monetary Fund (IMF) has cut its global economic growth forecast to 3.0 percent for 2026. This is down from 3.1 percent in its April 2026 prediction.

In its July World Economic Outlook update released on Wednesday, the IMF said global growth is now expected to be 3.0 percent in 2026 and 3.4 percent in 2027. These figures are below the average annual growth of 3.5 percent seen in 2024 and 2025.

The small drop in global economic growth is due to the economic effects of the war in the Middle East. Some of this impact has been balanced by stronger demand from advancements in artificial intelligence, according to the IMF.

The Fund noted that the effects vary a lot between countries. This depends on how much they are affected by the conflict and their role in the global technology market.

Different Impacts on Countries

The IMF pointed out that countries that export energy but are not in the conflict zone have gained from better trade terms. On the other hand, economies involved in the AI technology boom are seeing stronger economic activity, even if they import energy.

“The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle, thanks to advances in artificial intelligence (AI) and its adoption. The impact varies widely based on countries’ exposure to the war and position in the technology value chain,” the financial institution said.

“Energy exporters outside the conflict zone benefit from favourable terms of trade, whereas economies plugged into the technology-led upturn experience stronger activity even if they are energy importers,” it added.

But the IMF said growth prospects are still weak for many developing countries. It pointed out that activity is slowing down among energy importers that are not part of the tech market. This includes many low-income countries.

For Nigeria, the report kept its forecast that the economy will grow by 4.1 percent in 2026 and 4.3 percent in 2027. This is an increase from the 4.0 percent predicted for 2025.

Inflation Predictions

The IMF also warned that global inflation is likely to rise before it goes down. It predicts that headline inflation will jump from 4.1 percent in 2025 to 4.7 percent in 2026, then fall to 3.9 percent in 2027.

These new figures show an upward change from its April report, suggesting that the trend of falling inflation since early 2024 has slowed.

While the risks to the global economy have become more balanced since April, the IMF said they are still leaning towards the downside.

The report warned that there is a real chance of renewed conflict in the Middle East. This could lead to more price swings in commodities, threaten supply chains, raise costs, and put pressure on financial conditions.

“The possibility of renewed Middle East conflict looms large and could extend commodity price volatility, further threaten supply chains, raise prices, and weigh on financial conditions,” the IMF said.

The IMF cautioned that growing trade divisions could weaken economic output and push prices higher. It also noted that a possible correction in the tech market and shrinking financial buffers could increase risks.

Opportunities for Growth

On the positive side, the IMF said quicker recovery in energy markets, stronger investment in technology, and renewed international cooperation could help boost growth in the medium term.

Despite the rising geopolitical tensions, the IMF noted that the global economy has been more resilient than expected. The impact on commodity prices, inflation, and financial conditions has been relatively small so far.

It also pointed out that the full effects of the conflict have not been fully felt yet. Early signs indicate a slowdown in global economic activity and more pressure on some countries.

The Fund urged policymakers to focus on restoring price stability. This should be done through clear communication, keeping central banks independent, and ensuring strong financial supervision.

The IMF advised that leaders should rebuild financial buffers and limit financial support to temporary, targeted measures that maintain market price signals. It also called for structural changes to improve energy security, support AI development, adjust the economy, and boost international cooperation amid rising tensions.

“Global economic activity and the outlook are being shaped by two major forces, pushing in opposite directions with asymmetric effects across countries. First is the negative supply shock from the war in the Middle East. Second is the ongoing positive technology shock driven by advances in and use of artificial intelligence (AI) tools,” the Fund said.