IMF trims global and MENAP growth

The International Monetary Fund cut its 2026 global growth forecast to 3.1% this week as war in the Middle East lifted oil prices and inflation risks. (imf.org) In its April 14 World Economic Outlook, the Fund said global growth would reach 3.2% in 2027 under a “limited conflict” scenario, down from the 3.3% it projected for 2026 in January. The IMF said rising commodity prices, firmer inflation expectations and tighter financial conditions were already weakening momentum. (imf.org) The Fund’s regional outlook was sharper for the Middle East, North Africa, Afghanistan and Pakistan, or MENAP. At an April 16 briefing, IMF officials said MENAP growth is now projected at 1.4% in 2026, a 2.3 percentage-point downgrade from the October 2025 forecast. (imf.org) The IMF’s global forecast assumes the fighting fades by mid-2026 and energy prices rise about 19% this year. Even with that assumption, the Fund said headline inflation would run at 4.4% in 2026, breaking the disinflation trend that had followed the post-pandemic price surge. (imf.org) The regional hit is uneven. IMF officials said five of eight conflict-affected oil exporters in MENAP are now expected to contract in 2026, and Qatar saw the steepest revision, with growth marked down by nearly 15 percentage points because of infrastructure damage. (imf.org) Oil is the main transmission channel. In a regional update, the IMF said Brent crude moved above $100 a barrel after the Strait of Hormuz closure, while European natural gas prices surged 60% and fertilizer futures rose about 40%. (imf.org) For oil-importing economies in the region, the Fund estimated that a 10% increase in crude prices cuts output by about 0.5 percentage point and adds roughly 1 percentage point to inflation, while widening fiscal and external deficits. Egypt’s currency, for example, depreciated about 12% as prices adjusted. (imf.org) The IMF also laid out a worse case: if oil averages $110 a barrel in 2026, global growth would fall to 2.6% and global inflation would rise to 5.4%. In that scenario, the Fund said, the world economy would be close to recession territory. (imf.org) That leaves the Fund arguing for a harder balancing act from central banks and governments than it expected three months ago. The January update had projected 3.3% global growth for 2026 on the view that technology investment and easier financial conditions would offset trade-policy strains; April’s forecast replaces that optimism with an oil-shock warning. (imf.org)