Key facts
- Global economic growth is projected to slow significantly due to the Iran war and high commodity prices.
- The IMF has downgraded its global growth forecast to 3.1% for the current year.
- Global inflation is expected to rise to 4.4% this year.
- The forecast assumes the conflict in the Persian Gulf is short-lived and energy prices rise moderately.
- A severe scenario could lead to global growth falling to 2%.
The global economy is facing a significant slowdown, primarily driven by the ongoing conflict in Iran and persistent inflation, according to the International Monetary Fund (IMF). The fund has downgraded its projection for world output growth to 3.1% for the current year, a deceleration from the 3.4% expansion seen in 2025.
The conflict, involving U.S. and Israeli strikes on Iran and retaliatory actions that have impacted energy infrastructure, has led to a sharp increase in global oil and gas prices. Consequently, the IMF has revised its global inflation forecast upward to 4.4% for the year, from 4.1% in 2025 and 3.8% previously forecast for this year.
Prior to the current conflict, the world economy had demonstrated resilience against protectionist policies enacted by President Donald Trump. This resilience was partly supported by a tech boom, including substantial investments in data centers and artificial intelligence, which boosted productivity. However, the war in the Middle East has halted this positive momentum, as noted by IMF chief economist Pierre-Olivier Gourinchas.
The IMF's current forecast is based on the assumption that the conflict in the Persian Gulf will be short-lived and that energy prices will rise by a moderate 19% this year. The fund also warned of a more severe outcome, where prolonged energy shocks combined with central banks raising interest rates to combat inflation could cause global growth to plummet to 2%.