IMF Raises Growth Forecast for the Third Time to 3.3% in 2026, Supported Mainly by Advanced Economies

SadaNews - The International Monetary Fund (IMF) has raised its global growth forecasts for the third consecutive time, driven by improved performance in several major economies, despite ongoing trade and geopolitical pressures, according to the World Economic Outlook report released by the IMF on Monday.

The IMF expects the global economy to grow by 3.3% in 2026, before decreasing slightly to 3.2% in 2027. This pace is higher compared to the estimates from last October, which were at 3.1%, primarily supported by advanced economies and some major emerging markets.

Support from Advanced and Emerging Economies

According to the report, the upward revision of forecasts was mainly driven by stronger-than-expected performance in several advanced economies, particularly the United States, where robust consumption and continued investment, especially in sectors related to technology and artificial intelligence, contributed to an improvement in global average growth. The IMF raised its growth forecast for advanced economies by 0.2% in 2026 to 1.8%.

In contrast, the IMF adjusted its growth forecasts for emerging and developing economies in 2026 upwards by 0.2% to 4.2%. However, this support remains uneven, as indicated by the report, amid ongoing weakness in global trade and tightening financial conditions. Concurrently, the IMF lowered its 2027 forecast by 0.1% to 4.1%, suggesting that the current improvement remains dependent on narrow growth drivers and does not reflect a broad-based recovery in global growth prospects.

Inflation Decline

Despite the expected acceleration in growth, global inflation is set to continue its downward trajectory, supported by lower energy prices and reduced supply chain pressures, with expectations for this trend to persist over the next two years, although notable disparities exist between economies. The United States is likely to return to targeted inflation levels at a slower pace compared to other advanced economies.

The report indicates that the decline in energy prices by about 7% in 2026 is a key factor supporting this trend, amid moderate demand growth and increased supply. However, the path of energy prices remains subject to volatility, especially if geopolitical tensions escalate or supply disruptions occur.

Slowdown in Global Trade

Global trade remains one of the main vulnerabilities in the forecasts, with the IMF estimating that the growth of goods and services trade volume will decrease to 2.6% in 2026, compared to 4.1% in 2025, before rising to 3.1% in 2027, amid the continued impact of tariffs and heightened uncertainty surrounding trade policies, even assuming the continuation of policies in place since the end of December.

The United States and China

In the United States, the IMF raised its growth forecast by 0.3% to 2.4% in 2026 and lowered it by 0.1% to 2.0% in 2027, supported by developments in fiscal policy and lower interest rates, as well as strong consumption and continued investment, particularly in sectors related to technology and artificial intelligence.

In China, the growth forecast for 2026 was raised by 0.3% to 4.5% compared to 4.2% in last October, with U.S. tariffs decreasing by 0.2% to 4% in 2027, amid ongoing structural pressures and weak domestic demand, despite government support and sustained export strength.

The Middle East, Central Asia, and Africa

The IMF expects growth in the Middle East and Central Asia to accelerate from 3.7% in 2025 to 3.9% in 2026 and 4.0% in 2027, supported by increased oil production, resilient domestic demand, and continued reforms. Growth in sub-Saharan Africa is also expected to accelerate to 4.6% during 2026 and 2027, driven by economic stabilization efforts and reforms in key economies.

Downside Risks

Although economic risks are leaning towards a decline, there are several factors that could weaken growth prospects, including the possibility of a sudden correction in AI-related investments, a resurgence of trade tensions, and rising geopolitical risks that could disrupt global trade and supply chains, according to the IMF.

The report also highlighted that global sovereign debt levels are likely to continue rising, with increasing sensitivity of financial markets to changes in interest rates and capital flows, emphasizing the importance of more cautious fiscal policies and broader structural reforms.

Other Key Forecasts from the IMF:

Global economic growth is expected to be 3.3% in 2025, up 0.1% from forecasts in October.

Growth in advanced economies is projected to increase by 0.1% to 1.7% in 2025 from 1.6% in the October report.

Global inflation is expected to slow from 4.1% in 2025 to 3.8% in 2026 and then to 3.4% in 2027.

The average oil price is projected to decline to $62.13 per barrel in 2026, compared to $68.92 in 2025, with a slight increase to $62.17 in the following year.

Growth in the Eurozone in 2026 is predicted to rise by 0.1% to 1.3%, compared to estimates from last October, with no change at 1.4% in 2027.

Growth in India's economy is expected to increase by 0.2% to 6.4% in 2026 compared to 6.2% in October, remaining unchanged at 6.4% in 2027.

Japan's economy is expected to grow by 0.1% to 0.7% in 2026, compared to 0.6% in the October forecast.

The IMF has lowered its forecast for Russia's economic growth by 0.2% to 0.8% in 2026, compared to 1% in the October report.