IMF Slashes Global Growth Forecast Over Iran War

The International Monetary Fund has downgraded its global growth forecast for 2026 to 3.1 percent in its latest World Economic Outlook, released Tuesday, citing the outbreak of the war in the Middle East. This marks a 0.2 percentage point cut from its previous estimate of 3.3 percent.

The IMF said the revised outlook is based on the scenario that the conflict in Iran remains limited in “duration, intensity and scope”, with disruptions easing by mid-2026. Global growth is then expected to edge up to 3.2 percent in 2027. This is still below the recent pace of around 3.4 percent in 2024-25 and the 2000-19 average of 3.7 percent.

Under a more severe scenario, involving sharper and more prolonged increases in energy prices, global growth could slow to 2.5 percent in 2026. Further damage to energy infrastructure in the region could push that figure to as low as 2 percent.

Several major economies have seen their outlooks downgraded. The United Kingdom recorded the largest cut among G7 economies, with its forecast reduced by 0.5 percentage points to 0.8 percent growth this year. The IMF attributed this to “the war and a slower pace of monetary easing”, adding that growth is expected to recover to 1.3 percent in 2027, though still weaker than previously anticipated due to lingering energy price pressures.

Elsewhere, forecasts for Germany, France, the United States and China were also revised down. Germany’s outlook was cut by 0.3 percentage points to 0.8 percent, while others saw more modest reductions of 0.1 percentage point.

In contrast, India and Russia saw upward revisions of 0.1 and 0.3 percentage points, respectively. India’s upgrade reflects strong momentum from 2025 and a reduction in additional U.S. tariffs on its exports from 50 to 10 percent, which outweigh the impact of the Middle East conflict. Russia’s outlook, meanwhile, is supported by higher commodity prices, which are expected to boost growth in 2026, compared with the IMF’s January update.