The IMF has lowered its global growth forecast, warning that escalating geopolitical tensions and energy disruptions threaten economic activity.
“Once again, the global economy is threatened with being thrown off course – this time by the outbreak of war in the Middle East at the end of February 2026,” the IMF said on Tuesday, April 21, in its latest outlook.
Last year, the focus was on higher trade barriers and uncertainty; now, the slump in raw materials and war-driven disruptions, like the blockage of the Strait of Hormuz, are weighing on the outlook.
The fund revised down forecasts for many economies, noting that its projections assume the conflict remains limited and that economic disruptions ease by mid-2026.
The IMF now expects global growth of 3.1 per cent in 2026, down from 3.3 per cent forecast in January, and 3.2 per cent in 2027.
This would leave global growth below its long-term average.
IMF Managing Director Kristalina Georgieva had warned that even in a best-case scenario, in the years following the 2026 war outbreak, there would be no quick return to pre-war growth levels, with expansion likely to remain structurally weaker.
Economic growth is now expected to stabilise well below the 2000-2019 average of 3.7 per cent.
The IMF chief also highlighted the short-term risks of a surge in inflation resulting from the war.
Expectations for inflation in the United States and the eurozone have already risen significantly.
“Fortunately, longer-run expectations for inflation in future years have not budged – this is very good and very important,” Georgieva said.
Global headline inflation is expected to stand at 4.4 per cent in 2026 and fall to 3.7 per cent next year.
This would place the figures well above the 2 per cent target that many central banks have set themselves.
Georgieva does not yet see central banks such as the Federal Reserve or the European Central Bank under pressure to act in 2026, despite the ongoing conflict.
The IMF now forecasts eurozone growth at 1.1 per cent in 2026, revised down from the January estimate of 1.3 per cent. For 2027, the forecast drops to 1.2 per cent from 1.4 per cent.
The fund also adopted a more cautious outlook for the U.S., projecting growth of 2.3 per cent in 2026 (January: 2.4 per cent).
For 2027, growth is seen at 2.1 per cent, slightly above the earlier forecast of 2 per cent.
Germany’s 2026 growth forecast was cut to 0.8 per cent, reversing the recent upward revision three months prior.
The IMF now expects Germany’s economy to grow by 0.8 per cent in 2026.
As recently as January, forecasts had risen to 1.1 per cent.
The German government is also likely to follow suit and scale back its expectations in the near future: as of April 2026, Berlin is forecasting growth of 1 per cent this year.
The spring economic forecast guides Germany’s tax estimate.
As of April 2026, leading economic institutes have already cut their outlook to as low as 0.6 per cent.
Economists say higher energy prices are weighing heavily on the recovery.
Supply disruptions linked to the Strait of Hormuz have driven up global oil and gas prices, pushing fuel costs higher.
In response to the energy crisis in spring 2026, Germany’s coalition government has announced temporary tax cuts on fuel, reducing petrol and diesel prices by about 17 cents per litre for two months.
Workers may also receive a tax-free €1,000 bonus from employers.
