The International Monetary Fund says the global economy remains resilient despite the shock from the recent war but warns that inflation remains a concern. In its July update to the World Economic Outlook, the IMF kept its medium-term growth projections broadly unchanged while noting that progress in bringing down inflation has stalled.
The IMF says global growth is expected to reach 3 percent in 2026 and 3.4 percent in 2027, reflecting what it describes as a recovery from the economic impact of the war.
"We are projecting global growth of 3% in 2026 and 3.4% in 27, broadly unchanged from April on a cumulative basis. In effect, we expect a V-shaped recovery, weaker growth this year relative to our pre-war forecast, followed by a rebound next year." said Petya Koeva Brooks, Deputy Director, IMF Research Department.
But while growth is holding up, inflation is proving more persistent. The IMF says the global disinflation trend that began in early 2024 has now stalled, prompting an upward revision to its inflation forecast for this year.
"On inflation, the picture is somewhat less encouraging. Global headline inflation has been revised up to 4.7% this year, while our core inflation forecast is broadly unchanged. Put simply, the disinflation trend that has been in place since early 2024 has stalled." stressed Brooks.
Even so, the IMF says the global economy has weathered the impact of the war better than initially feared.
"Nevertheless, the world economy has weathered the shock from the war better than feared so far, with limited evidence of second round effects. A large spike in oil prices was avoided thanks to inventory drawdowns, expanded production outside the Gulf in actions to help soften oil demand, and a steady rise in the renewable energy share, combined with lower energy intensity than just a few years ago, has also made many economies more resilient. And while financial conditions tighten sharply in early April, they have since eased and remained supportive by historical standards." Added Brooks.
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