IMF raises 2026 global growth forecast to 3.1% and sees 3.4% in 2027

The International Monetary Fund released its October 2026 World Economic Outlook on 13 October, as finance leaders gathered for the IMF and World Bank Annual Meetings in Bangkok. It forecasts global growth of 3.1% in 2026, up from 3.0% in its July forecast, and 3.4% in 2027. Global inflation is projected at 4.7% in 2026, easing to 4.1% in 2027.

The projections rest on an energy shock. The IMF assumes oil averages $96 a barrel this year, according to Associated Press and Bernama reports, and both link the shock to the war in the Middle East. Bernama reports that the forecast assumes shipments through the Strait of Hormuz begin to resume in March 2027.

Advanced economies slow in 2027 while the Middle East contracts

AP reports that the United States is projected to grow 2.3% in both 2026 and 2027. Advanced economies are forecast at 2.1% in 2026 and 1.9% in 2027, and the 21-country euro area at 1.1% and 1.2%.

China is forecast at 4.5% in 2026, down from 5% in 2025. India is expected at 7% this year, down from 7.7%, which AP says makes it the fastest-growing major economy in the report. Emerging and developing economies are projected to grow 3.7% in 2026 and 4.4% in 2027. The Middle East and Central Asia region is expected to contract in 2026 before growing 6.3% in 2027.

The oil assumption
AP reports that the IMF projects oil prices to rise nearly 41% in 2026, averaging $96 a barrel. Bernama places the figure 16% above the April reference forecast.

Oil and gas costs stay above pre-war levels

AP reports that oil prices rise nearly 41% this year, averaging $96 a barrel. Bernama puts that oil figure 16% above the IMF’s April reference forecast. It also projects natural gas at $20 per million British thermal units, about 36% above the April reference price.

As of the 13 October release, Bernama reports that reopening is assumed to begin in March 2027, with a return to pre-war conditions broadly by October 2027. The report assumes a gradual rather than immediate normalisation of energy flows, and energy prices are expected to stay above pre-war levels in the meantime.

An AI boom that lifts some economies more than others

The IMF says the AI boom is offsetting part of the damage from higher energy prices, but the gains are uneven. AP reports that growth is concentrated in 32 countries, which account for 95% of global growth, compared with 54 countries in April. The United States and China account for more than three-quarters of net demand for AI-related chip and equipment imports.

Bernama reports that several Southeast Asian economies are expected to benefit from data centre activity and the upturn in the global technology cycle. Silvana Tenreyro, the IMF’s director of research, said the outlook is “highly uneven.” AP also reports that Kristalina Georgieva, the IMF’s managing director, estimated that about 40% of jobs will be augmented, downgraded or eliminated over time.

The forecast assumes Strait of Hormuz shipments resume in March 2027.

Market and debt risks the Fund flags, and the March 2027 assumption

The IMF names an AI-related stock market correction, rising bond yields, cyberthreats to financial systems and rising debt among its risks. AP cites South Korea’s Kospi as an example of the stock risk: the index fell as much as 7% on Tuesday before closing 5.5% lower.

AP reports that energy shocks tied to the Iran war will slow growth in more vulnerable developing and emerging economies, and that the IMF urges countries to improve their national finances and tame mounting debt, a need that Tenreyro said is especially crucial at a time of high borrowing costs. Bernama reports that fiscal policy in emerging and developing economies is expected to tighten gradually, and that outcomes vary by commodity dependence, exposure to the conflict, remittances, tourism and financial conditions. The baseline depends on the March 2027 reopening timetable.

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