In the latest World Economic Outlook (WEO) report released on April 14, Eastern Time, the International Monetary Fund (IMF) stated that so far, the global economy has withstood a series of shocks, but the Middle East conflict since the end of February is testing its resilience.
Given the ongoing uncertainty, the IMF presented a &#34;reference forecast&#34; (rather than the traditional baseline forecast) in this WEO. This forecast is based on the assumption that the duration, intensity, and scope of the Middle East conflict will be limited, and the damage caused will dissipate by mid-2026. Fiscal and trade policies are expected to remain unchanged during the forecast period. Uncertainties related to trade and other economic policies, as well as geopolitical developments, are expected to persist until 2027.
Under this reference forecast scenario, the IMF expects global economic growth to be 3.1% in 2026 and 3.2% in 2027, lower than the approximately 3.4% level in 2024-2025, with medium-term growth stabilizing around this level, below the historical average of 3.7% from 2000 to 2019. Compared to the January WEO, this WEO has lowered the 2026 forecast by 0.2 percentage points, while the 2027 forecast remains unchanged. The IMF added that without this conflict, the WEO would have slightly raised the 2026 economic growth expectation by 0.1 percentage points to 3.4% compared to January. At the same time, the IMF has raised the global overall inflation rate expectations for 2026 and 2027 to 4.4% and 3.7%, respectively.
It is worth mentioning that there is a high degree of variability among countries under the reference forecast scenario. Although the adjustments in growth and inflation at the global level seem relatively small, the impact on conflict-affected regions and other more vulnerable economies—especially those that are already fragile and reliant on commodity imports, such as emerging markets and developing economies—is more significant. Compared to the January WEO, the economic growth expectation for emerging markets and developing economies in 2026 has been lowered by 0.3 percentage points, while the forecasts for developed economies have remained largely unchanged. Additionally, compared to January, the cumulative growth rate forecast for low-income net energy-importing economies for 2026-2027 has been lowered by 0.5 percentage points, while the cumulative growth rate forecast for developed economies reliant on energy imports has been raised by 0.2 percentage points.
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Downside Risks Dominate
In addition to the reference forecast scenario, the IMF stated that under a more adverse scenario with larger and longer-lasting increases in energy prices, global economic growth in 2026 will further slow to 2.5%, and the inflation rate will reach 5.4%. In scenarios where energy infrastructure in conflict areas suffers more severe damage, the impact will be even greater: global economic growth will drop to around 2% in 2026, and by 2027, the overall inflation rate will be slightly above 6%. The impact on emerging markets and developing economies is nearly twice that of developed economies
In any case, the IMF once again emphasizes that downside risks dominate. The IMF analysis states that, first, tensions in the Middle East may further escalate, potentially evolving into the largest energy crisis in modern history or serving as a trigger for domestic political conflicts within some economies. Political pressure factors may intertwine with changes in trade and other international policies. Secondly, even without considering the Middle East conflict, trade disputes may erupt. Furthermore, even if productivity improves, a reassessment of profit expectations related to artificial intelligence (AI), or a reduction in profit margin expectations due to intensified competition, could lead to a decline in investment and trigger sudden adjustments in financial markets. Finally, the widening fiscal deficit and increasing public debt, especially when fiscal buffers have been weakened, may put pressure on long-term interest rates, thereby affecting broader financial conditions. This includes potential impacts on central bank independence and the credibility of monetary policy, as well as inflation expectations being pushed higher, particularly when major prices are impacted, leading to an overall rise in inflation.
However, the IMF also states that if the rapid proliferation of AI can significantly enhance productivity and boost business vitality, then AI-related investments may further stimulate economic activity and ultimately translate into sustainable growth. Additionally, a resurgence of momentum in structural reforms and a continued easing of trade tensions may also support economic activity.
In the reference forecast scenario, the IMF expects the growth rates of developed economies to be 1.8% and 1.7% in 2026 and 2027, respectively, with the 2026 forecast slightly downgraded by 0.2 percentage points from previous estimates. Due to improvements in U.S. trade conditions, enhanced growth momentum in related countries, and offsetting measures taken by governments, overall, the IMF believes that the impact of the Middle East conflict on the growth of developed economies is limited, with only some net energy-importing economies, such as the Eurozone and the UK, expected to face significant negative impacts.
Regarding the U.S. economic outlook, the IMF expects its economic growth rate for 2026 to be slightly downgraded by 0.1 percentage points to 2.3%. Although the increase in trade barriers since April 2025 continues to exert pressure on the level of economic activity, U.S. fiscal policy and the lagging effects of interest rate cuts in 2025 will support U.S. economic growth. Additionally, the IMF believes that, given that the U.S. is a net energy exporter, the Middle East conflict is expected to have only a minor negative impact on the U.S. Furthermore, the U.S. economy also has the following balancing factors: in the first quarter of 2026, U.S. economic activity rebounded compared to the fourth quarter of 2025 (following the end of the federal government shutdown); productivity growth is stronger than expected; although the ruling under the International Emergency Economic Powers Act (IEEPA) may reduce fiscal revenue from tariffs, its impact on fiscal balance and economic activity is expected to be small and will persist throughout the forecast period.
The IMF also expects that in 2027, U.S. economic growth will remain robust at 2.1%, benefiting in the short term from fiscal boosts brought by tax incentives (including corporate investment incentives under the Affordable Care Act). The momentum of technology-driven growth is expected to slow down, but it will still partially offset the impacts of reduced immigration and slowing consumption. Strong productivity growth is expected to gradually weaken and return to historical normal levels
For emerging markets and developing economies, the IMF expects the economic growth rate to drop to 3.9% in 2026, a downward adjustment of 0.3 percentage points from before the Middle East conflict, but will rebound to 4.2% in 2027. The IMF states that the impact of the Middle East conflict on economic growth varies among different economies, depending on factors such as geographical location, capital flows, remittances, and energy dependence. Overall, however, the net impact of the Middle East conflict on the economic growth of emerging market economies is greater than that on developed economies.
The IMF predicts that the economic growth rate of emerging and developing economies in Asia will decline from 5.5% in 2025 to 4.9% in 2026, and further decrease to 4.8% in 2027. However, for China's economic growth forecast this year, the IMF has lowered it by 0.1 percentage points compared to the January WEO, but it is still an increase of 0.2 percentage points from the forecast in October last year, reaching 4.4%. The IMF states that this reflects the effective tariff rate on Chinese goods decreasing in the U.S. and that China's stimulus measures have offset the negative impacts of the Middle East conflict. The IMF maintains its forecast for China's economic growth rate in 2027 at 4.0%, consistent with the January WEO.
Global Inflation Will Pause Its Decline
In addition to broadly lowering economic forecasts, after several quarters of expecting global inflation to gradually decline, the IMF has changed its stance this time, predicting that global inflation will pause its decline, with the overall inflation rate rising from 4.1% in 2025 to 4.4% in 2026, but then falling back to 3.7% in 2027. This forecast is a significant upward adjustment of 0.7 percentage points from the October WEO last year, reflecting the rise in energy and food prices. In the January WEO, the IMF had expected global inflation to continue to decline, with the overall inflation rate dropping to 3.8% in 2026 and 3.4% in 2027.
While significantly raising inflation expectations, the IMF reiterated its judgment from the past few months that inflation is expected to continue to show divergence among countries. The IMF states that this is mainly due to the persistence of service sector inflation (where domestic factors often play a larger role) and the increasing impact of country-specific factors on inflation.
Due to the transmission effects of rising tariffs and energy prices, as well as the gradual easing of service sector inflation in the context of overall balance in the labor market, the IMF still expects the core inflation rate in the U.S. to return to the 2% target level by 2027, consistent with the January WEO.
For Japan, the IMF expects inflation to ease in 2026 compared to 2025 as food and commodity prices decline, trending towards the target level by the end of 2027. In the Eurozone, the IMF expects the overall inflation rate to temporarily rise above 2% in 2026 and to remain above the target level in 2027, which is an upward adjustment from the January WEO expectations. Additionally, the IMF expects China's inflation rate to begin to rise from a low level, while India's inflation rate is expected to significantly decline in 2025 due to weak food prices, gradually returning close to the target level thereafter

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The International Monetary Fund (IMF) has lowered its global economic growth forecast for 2026 to 3.1% in its latest World Economic Outlook report, and expects it to be 3.2% in 2027. The IMF pointed out that the conflicts in the Middle East pose a test to the resilience of the global economy, and uncertainty will persist until 2027. The global inflation rate forecast has also been raised to 4.4% for 2026 and 3.7% for 2027. The economic growth expectations for emerging markets and developing economies have been more significantly affected, with a downward adjustment of 0.3 percentage points for 2026

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IMF: Significantly lowers the global economic growth forecast for 2026 to 3.1%, inflation will reignite