Economic Buzz: IMF expects world economy to grow sluggishly by 3% this year

The International Monetary Fund on Wednesday modestly downgraded its outlook for the world economy this year, citing the energy shock caused by the Iran war. But the fallout from the conflict is being partially offset by booming investment in artificial intelligence and other technologies. Global growth is projected to be 3.0 percent in 2026 and 3.4 percent in 2027, down from the average of 3.5 percent observed in 2024?25 and broadly unchanged on a cumulative basis compared with the forecasts in the April 2026 World Economic Outlook (WEO). The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle thanks to advances in artificial intelligence (AI) and its adoption, IMF said. Meanwhile, global headline inflation is expected to increase from 4.1 percent in 2025 to 4.7 percent in 2026 before declining to 3.9 percent in 2027. Slightly revised upward from April, these projections indicate that the disinflation trend in place since the beginning of 2024 has stalled, the Fund noted. The possibility of renewed Middle East conflict looms large and could extend commodity price volatility, further threaten supply chains, raise prices, and weigh on financial conditions, the IMF further noted.

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