The International Monetary Fund (IMF) on October 13 projected that global growth will slow to 3.1 percent in 2026 from 3.5 percent in 2025, before picking up to 3.4 percent in 2027, while global headline inflation rises to 4.7 percent this year as a war in the Middle East keeps energy prices high.
The forecasts appear in the October 2026 World Economic Outlook, titled “Resilience under Strain, Urgent Choices.” According to its executive summary, the 2026 growth projection is unchanged from the IMF’s April 2026 outlook and the 2027 figure has been revised moderately upward. Headline inflation is projected to ease to 4.1 percent in 2027; the summary describes the inflation forecasts as a cumulative upward revision of 0.7 percentage point, driven mainly by energy and food prices.
Country and regional outlook
The IMF’s statistical tables project growth in advanced economies of 2.1 percent in 2026 and 1.8 percent in 2027, and in emerging market and developing economies of 3.7 percent and 4.4 percent. The United States is projected to grow 2.3 percent in both years, the euro area 1.1 percent in 2026 and 1.2 percent in 2027, and Japan 0.7 percent in each year. China’s growth is forecast at 4.5 percent in 2026 and 4.0 percent in 2027, and India’s at 7.0 percent in both years.
The sharpest swing is in the Middle East and Central Asia, where the IMF projects output to contract 0.3 percent in 2026 before growth rebounds to 6.3 percent in 2027. Saudi Arabia’s economy is projected to shrink 3.3 percent this year and grow 7.9 percent next year.
The report’s first chapter dates the war in the Middle East from February 27, 2026, and says that in March the conflict “effectively closed the Strait of Hormuz,” a disruption it says affected about 20 percent of global oil supply. It says oil prices peaked in late March at $126 a barrel. IMF staff project the average petroleum spot price at $96 a barrel in 2026, and the chapter notes that “Brent futures indicate a return to preconflict prices of $79 a barrel by the end of 2027.”
World trade volume growth is projected to slow from 5.0 percent in 2025 to 4.6 percent in 2026. Over the medium term, the IMF expects global output to expand at an average annual pace of 3.2 percent in 2028–31.
Sources of strength and risks
In an IMF blog post accompanying the report, Silvana Tenreyro pointed to strong labor markets, financial systems that held up through the sharpest monetary tightening in almost half a century, energy supply adjustments such as rerouted supplies and fuel switching, and an investment boom driven by artificial intelligence (AI) as the main sources of resilience. The post projected core inflation of 3.9 percent in 2026 and 3.7 percent in 2027.
The IMF said risks are tilted to the downside. The executive summary lists a prolonged or escalating Middle East conflict, disruptions to energy infrastructure and a possible reassessment of AI-related profitability, along with fiscal vulnerabilities and renewed trade tensions. On the upside, it cites more persistent AI investment, faster productivity gains and new trade arrangements. The blog post said low energy inventories could magnify geopolitical shocks to energy prices.
Why it matters
The IMF said energy-importing economies with little connection to the technology value chain face the most difficult outlook, including higher import costs, weaker real incomes and tighter fiscal space. For households, the upward revision to inflation stems mainly from energy and food prices, and the blog post said low-income countries and households are especially exposed to food price spikes.
For governments, the IMF urged credible fiscal adjustment to rebuild fiscal space, combining revenue measures with spending restraint, and said support for energy and food costs should be temporary and targeted. A chapter on cost-of-living crises found that price-suppressing measures can require 3 to 22 times more fiscal resources than targeted, temporary transfers. On interest rates, the summary said monetary policy should be tailored to each economy: “The case for tightening is strongest in economies that are plugged into stronger demand pressures,” particularly where inflation “was already above target before the twin shocks and remains so.”
What to watch
The blog post set out a risk scenario in which higher commodity prices and fiscal concerns push up term premiums and inflation expectations. In that case, it said, global growth in 2027 would be materially lower than the baseline forecast and inflation significantly higher, with spillovers to emerging and developing economies.
The caveats
The IMF said its estimates are based on statistical information available through October 1, 2026, and may not reflect the latest data. The baseline assumes the oil price path described in the report; the IMF’s own risk analysis shows outcomes could differ markedly if the conflict or energy disruptions worsen.
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