Following a period marked by tighter trade conditions and heightened uncertainty, the global economy is facing a new shock linked to the recent escalation of the conflict in the Middle East. Assuming the conflict remains contained, global growth is projected to slow to 3.1% in 2026 and 3.2% in 2027. Inflation is expected to rise slightly in the short term, increasing from 4.1% in 2025 to 4.4% in 2026, mainly reflecting disruptions in energy and trade markets.
Against this backdrop, a comparison was made between the IMF’s October 2025 and April 2026 editions of the World Economic Outlook (WEO). The April update reflects the initial effects of the energy and trade disruptions resulting from the conflict, although the high degree of uncertainty surrounding its evolution warrants caution when interpreting these projections.
Table 1: IMF 2026 Projections – October 2025 vs. April 2026 World Economic Outlook (WEO)
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In the European Union, growth for 2026 was revised slightly lower to 1.3% in the April edition of the World Economic Outlook (WEO), compared with 1.41% in the October edition. By contrast, inflation was revised upwards by around 0.65 percentage points to 2.8%, largely reflecting the impact of higher energy prices. Among the major economies, Germany’s growth forecast was revised down to 0.8%, while France’s outlook remained unchanged at 0.9%. Spain stands out, with projected growth for 2026 revised upwards by 0.14 percentage points to 2.1%. Italy recorded the largest downward revision, with the IMF now projecting growth of 0.5% in 2026, compared with the previous forecast of 0.8%. Inflationary pressures are expected across all countries, although they are likely to remain relatively contained in France (around 1.8%), while exceeding 3% in southern European economies such as Portugal and Spain. Italy and Germany are expected to record inflation rates of 2.6% and 2.7%, respectively. In 2027, European Union growth is projected to edge up to 1.4%, while inflation moderates to 2.4%, still slightly above the October forecast, reflecting the IMF’s view that the conflict will continue to weigh on the region’s growth prospects.
The IMF’s revisions for the United States are concentrated mainly on 2026, while the outlook for 2027 — both in terms of growth and inflation — remains broadly unchanged compared with the October WEO. Inflation in 2026 was revised significantly higher, by around 0.8 percentage points, reflecting the increase in energy prices associated with the conflict in the Middle East. At the same time, GDP growth for 2026 was revised upwards by 0.2 percentage points, with the IMF highlighting a strong start to the year, supported by robust investment at the end of 2025, resilient domestic demand and supportive fiscal policy. For 2027, US growth is expected to slow to 2.1%, accompanied by a decline in inflation to 2.1% (from 3.2% in 2026), signalling a gradual return to price stability.
Growth in the Middle East and Central Asia was revised sharply lower for 2026, from 3.83% to 1.9%, reflecting the combined impact of higher energy prices and significant supply-side disruptions associated with the effective closure of the Strait of Hormuz, as well as damage to or precautionary shutdowns of energy infrastructure. The largest downward revisions affect the commodity-exporting economies most exposed to these disruptions — Bahrain, Iran, Iraq, Kuwait and, in particular, Qatar — due to interruptions in oil and gas production and transportation. Estimated losses exceed 10 million barrels of oil per day and approximately 500 million cubic metres of gas per day, in addition to spillover effects on aviation, logistics, trade and tourism. Qatar is expected to enter a severe contraction in 2026, reflecting the impact on LNG exports and related services, while Saudi Arabia and the United Arab Emirates are comparatively less affected, although their growth forecasts have also been revised downwards. The baseline scenario assumes a recovery in 2027, with regional growth projected at 4.6%, as energy production and transportation gradually normalise from mid-2026 onwards. However, risks remain predominantly tilted to the downside should hostilities persist or transport restrictions remain in place. Iran’s economy has been revised to contract by 6.1% in 2026 before recovering to 3.2% in 2027, while Saudi Arabia is expected to grow by 3.1% in 2026, accelerating to 4.5% in 2027.
Economic growth in Latin America and the Caribbean is expected to remain stable at 2.3% in 2026 before accelerating to 2.7% in 2027. The effects of the conflict in the Middle East are uneven across the region, with smaller economies facing more significant adverse impacts. In Brazil, growth is expected to slow to 1.9% in 2026 (unchanged from the October forecast) before edging up to 2.0% in 2027. In 2026, the conflict involving Iran is expected to have a modest positive impact on growth, estimated at around 0.3%, reflecting Brazil’s position as an energy exporter. By contrast, in 2027, weaker global demand, higher production costs (including fertilisers) and tighter financial conditions are expected to weigh on activity, reducing growth by approximately 0.24%. Strong international reserves, solid public-sector liquidity and exchange-rate flexibility are expected to help mitigate these effects. According to the IMF, Mexico is undergoing a moderate recovery following a year of stagflation, during which growth slowed to 0.6%, reflecting restrictive monetary and fiscal policies, as well as trade-related pressures.
Chile’s economic outlook has been revised upwards, despite the country being a net energy importer with a strong dependence on fossil fuels. This improvement reflects favourable external conditions and improved prospects for copper prices, supported by supply-side disruptions and stronger demand. In Colombia, higher energy prices are expected to provide a modest boost to growth in 2026, although this benefit is largely offset by rising fuel subsidy costs. The country faces a significant upward revision to inflation, with the IMF raising its forecasts to 5.9% in 2026 and 5.2% in 2027 (from 3.47% and 3.04%, respectively). This revision mainly reflects higher energy and fertiliser prices, a substantial increase in the minimum wage at the end of 2025, persistent fiscal imbalances, resilient consumer demand, risks associated with a stronger El Niño phenomenon and growing political uncertainty. Peru is expected to outperform previous projections, supported by higher copper prices and a robust macroeconomic framework. Although elevated energy prices may place temporary pressure on inflation, these pressures are expected to ease gradually, with inflation falling below target to around 1.8% by 2027. High levels of international reserves and a current account surplus provide significant protection against external shocks.
China’s outlook has been revised slightly upwards, with the IMF increasing its GDP growth forecast for 2026 by 0.2 percentage points to 4.4%. The revision reflects the momentum carried over from 2025, lower effective US tariffs and domestic stimulus measures that help offset the shock associated with the conflict in the Middle East. Growth is expected to remain above the global average, supported by resilient exports, although it is projected to slow to 4.0% in 2027 due to weaker domestic demand and a less favourable global environment.
Inflation has also been revised upwards, to 1.2% in 2026 and 1.5% in 2027, reflecting the transmission of higher global energy and commodity prices. Despite the external shock, China’s current account surplus is projected to reach 3.5% of GDP in 2026 and remain elevated at 3.3% in 2027, supported by resilient exports and the redirection of trade flows towards Asia and Europe.
Finally, India’s macroeconomic outlook remains robust in 2026–27, supported by easing pressures in external trade. GDP growth for 2026 has been revised upwards to 6.5%, reflecting stronger economic momentum and the reduction of additional US tariffs on Indian goods, despite the adverse impact of the conflict in the Middle East. Inflation has been revised upwards to 4.7% in 2026 but is expected to remain close to the central bank’s target, benefiting from contained food prices.
