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<\/p>\nThe IMF cut its 2026 global growth projection today, warning that the world economy could be “thrown off course” by war in the Middle East – as the conflict roils commodity markets and sparks higher prices.<\/p>\n
The global economy is set to grow by 3.1% this year, the International Monetary Fund said in its World Economic Outlook report today, released during its spring meetings in Washington.<\/p>\n
This is down from 3.3% forecast in January before hostilities erupted as US-Israeli strikes against Iran starting on February 28 prompted Tehran’s retaliation and sparked a broader conflict in the region.<\/p>\n
“We were planning to upgrade growth for 2026 to 3.4%” if not for the war, IMF chief economist Pierre-Olivier Gourinchas told AFP.<\/p>\n
Prices of oil, gas and fertilisers have surged due to the conflict, as Iran virtually blocked traffic through the Strait of Hormuz, a key waterway for shipments. US President Donald Trump has also ordered a naval blockade around Iran’s ports.<\/p>\n
The fund expects higher inflation this year at 4.4%t, 0.6 percentage points above its January forecast.<\/p>\n
After this the “disinflation path” of the past few years should reassert itself, Gourinchas said.<\/p>\n
But these projections assume a relatively short-lived conflict with temporary energy market disruptions.<\/p>\n
“We have to be very concerned about the potential for this to become a major energy crisis,” he warned.<\/p>\n
In more adverse scenarios where energy prices remain steep for the year, global growth could slow to 2.5% or even around 2%.<\/p>\n
“Since 1980, it’s basically been four times when growth has been at 2% or below,” said Gourinchas.<\/p>\n
These included periods such as the 2008 global financial crisis and Covid-19 pandemic.<\/p>\n
“This latest shock comes less than a year since the shift in US trade policies, and the transition to a new international trade system is still ongoing,” the IMF said.<\/p>\n
A year ago, Trump unleashed sweeping tariffs on US trading partners, rocking financial markets and snarling supply chains.<\/p>\n
A swath of these tariffs has been struck down by the Supreme Court, but uncertainty lingers as Trump moves to reimpose duties via other means.<\/p>\n
Uneven impact<\/p>\n
Although overall revisions to global growth and inflation appear modest, the IMF cautioned that the war has taken a bigger toll on the Middle East and “vulnerable economies” elsewhere.<\/p>\n
<\/p>\n
“The impact on emerging market and developing economies would be almost twice that on advanced economies,” the fund said.<\/p>\n
Higher energy and fertiliser costs could bring steeper food costs, mainly hitting low-income energy importers, Gourinchas said.<\/p>\n
Growth projections this year for the Middle East and central Asia were cut by around half to 1.9%.<\/p>\n
Saudi Arabia, the Middle East’s biggest economy, is set to see 3.1% growth this year, down 1.4 percentage points from January’s expectation.<\/p>\n
Among the world’s two biggest economies, US growth is still set to accelerate to 2.3% this year, although the pace of growth was revised slightly lower.<\/p>\n
“The US at the margin is benefiting from higher energy prices,” Gourinchas said. But gasoline prices have also jumped for consumers.<\/p>\n
China’s growth is anticipated to cool to 4.4%, a touch below the January forecast, too.<\/p>\n
The IMF flagged an underlying “unevenness” in both economies.<\/p>\n
Domestic activity lags behind exports in China, while a strong showing in the US has been accompanied by low employment growth.<\/p>\n
Euro area growth was revised 0.2 percentage points down to 1.1% for 2026.<\/p>\n
UK growth saw a bigger downshift by 0.5 percentage points, to 0.8% this year.<\/p>\n
While the IMF does not expect inflation expectations to go off-track, there is concern that they may not be as well-anchored as before.<\/p>\n
Past inflation episodes remain fresh in the public’s minds, and firms might act to restore margins more quickly than before.<\/p>\n
“If that happens, then you can get much more persistent inflation going on, that would be reflected in higher inflation expectations,” Gourinchas said.<\/p>\n
If so, central banks might need to step in and raise interest rates to cool the economy, despite the ongoing negative supply shock.<\/p>\n","protected":false},"excerpt":{"rendered":"The IMF cut its 2026 global growth projection today, warning that the world economy could be “thrown off…\n","protected":false},"author":2,"featured_media":398186,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60],"class_list":{"0":"post-398185","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-ie","11":"tag-ireland"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/398185","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=398185"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/398185\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/398186"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=398185"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=398185"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=398185"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}