Global Economy remains resilient but is hampered by continuing US-Iran conflict, says IMF - EMEA
Growth in the global economy is set to retract sharply, after disruption to energy supply chains and a return of inflationary pressure following the Iran war, according to the International Monetary Fund’s. . .
Growth in the global economy is set to retract sharply, after disruption to energy supply chains and a return of inflationary pressure following the Iran war, according to the International Monetary Fund’s July 2026 update of the World Economic Outlook (WEO). As reported byThe New York Times, the IMF are predicting global growth will fall to 3% this year – half a percentage point down on the 2025 figure. Furthermore, due to high commodity prices, the IMF are forecasting that global inflation will increase to 4. 7% in 2026 – up from 4. 1% in 2025The latest projections are a reflection on “the damaging toll” of the attacks on Iran by the United States and Israel. The continuation of hostilities in the Middle East have further destabilised the world economy, following the fallout from the COVID pandemic and the Russia-Ukraine conflict, the media outlet highlighted. Global fragmentation shocksThe IMF report coincides with the latest joint research webinar series of the IMF Middle East Centre for Economics and Finance (IMF CEF) and Euro-Mediterranean Economists Association (EMEA), entitled “Global Fragmentation, Fiscal Policy, and Economic Growth: A Cross-Country Analysis. ”The paper has examined the macroeconomic and fiscal effects of global fragmentation shocks and the role of mitigating fiscal rules, drawing on evidence from 121 countries over the period 1985–2023. The IMF-CEF-EMEA study of a globally fracturing economic picture appears closely aligned with the IMF’s latest WEO – especially on the widening gap between developed and developing nations. One of the key takeaways from the IMF’s July WEO, as reported byThe Wall Street Times,was that the Middle East and North Africa (MENA) region faces “a cumulative growth revision” of nearly three percentage points for 2026, with the broader MENA region contracting by an estimated -0. 5%. And the influential digital platform goes on to say that the July WEO indicated “a widening divergence” between economies. Those that are inside the advanced technology value chain are set to prosper, whilst those that are dependent upon commodity imports “face significant macroeconomic softening. ”Evidence that renewable energy has offset rising oil pricesIn April, the IMF projected that growth would decline to 3. 1% but, according toThe New York Times, that figure has now required a further slight downgrading. This has been due to “the protracted nature of the conflict” in the Middle East and the fragility of the ceasefire, which has seen shipping in the Strait of Hormuz coming under continued attack and the US re-imposing oil sanctions on Iran. Oil prices, which had started to fall on the hope of a successful ceasefire and end to hostilities, are once again on the increase. Meanwhile, as reported by the online news platform,TheNewsMarket,the IMF are forecasting a small upturn in growth next year, to 3. 4%. This is on the basis that the world economy will, by then, be showing signs of a sustained improvement from the Iran war, described by Petya Koeva Brooks, Deputy Director of the IMF Research Department, as a V-shaped recovery. Nevertheless, despite the modest 2026 growth downgrade, the IMF said that the global economy was “relatively resilient”, and capable of withstanding the effects of the Iran war better than expected. First quarter growth had been above expectations, whilst the transition to renewable energy had offset rising oil prices, together with the impact of investments in AI powered technology. To keep the global economy on track, the IMF have pressed policymakers to prioritise price stability – against a background of volatility in the commodity markets and surging demand for new AI technology,The New York Timesreported. Global Economic Output Looks Slower for 2026, IMF Says – The New York TimesIMF Revises Global Inflation to 4. 7% in July 2026 Outlook – The Wall Street TimesIMF / July 26 World Economic Outlook UpdateSee link to latest IMF-CEF-EMEA Webinar Report below:IMF-CEF–EMEA Webinar Report: “Global Fragmentation, Fiscal Policy, and Economic Growth: A Cross-Country Analysis” – EMEA