The International Monetary Fund has raised its 2026 global growth forecast by 0.1 percentage points to 3.1%, citing advanced economies’ resilience amid war-driven energy prices. However, it warns of a “split outlook” as low-income nations remain vulnerable to supply shocks. This adjustment comes after a 3.5% growth in 2025, with the IMF emphasizing the contrasting impacts of the US-Iran war and the AI boom on different regions.
In its World Economic Outlook report, released during the organization’s Annual Meetings in Bangkok, the IMF highlights the contrasting fortunes of advanced and developing economies. While many wealthier nations benefit from rising investment in artificial intelligence (AI) technology, poorer countries face challenges due to high energy prices caused by the US-Iran war. The report shows that AI has been a major driver of global trade, accounting for nearly half of the increase in global trade from 2023 to 2025, according to IMF Chief Economist Silvana Tenreyro.
Advanced economies benefit from AI boom
The IMF’s chief economist, Silvana Tenreyro, noted that the global economy’s resilience is under strain, with risks tilted to the downside. IMF Managing Director Kristalina Georgieva warned of a “real risk of complacency” after multiple shocks failed to push the world into recession. Georgieva further emphasized that the global economy is currently “standing on one leg: the AI leg,” highlighting its disproportionate reliance on this sector.
Advanced economies, particularly those in the AI supply chain like Taiwan and South Korea, are expected to grow by 2.1% in 2026. In contrast, the Middle East and Central Asia region, directly impacted by the Iran war, is projected to contract by 0.3%. Saudi Arabia, one of the worst-affected nations, faces a 3.3% economic contraction, a 5.0 percentage point downgrade from the Fund’s previous forecast. Despite this, the IMF anticipates a swift recovery for the region once the conflict ends, though the timing remains highly uncertain.
War’s impact on energy prices and vulnerable nations
The US-Iran conflict has led to a surge in global energy prices. Refined petroleum product prices remain 70-95% above pre-war levels, affecting countries reliant on energy imports. The war’s impact has widened, with Iran-backed Yemeni Houthi forces targeting Saudi Arabia’s oil facilities and transport hubs, further destabilizing the region.
Global inflation and policy responses
Global inflation is expected to reach 4.7% in 2026, affecting both advanced and developing economies. Tenreyro emphasizes the need for urgent action, urging governments to implement temporary, targeted measures to alleviate the burden of high energy costs on the public. She also warns that a sudden reassessment of AI-related profits and productivity gains could halt the technology tailwind, weakening investment and tightening financial conditions.
