PrintMiddle East Conflict Could Derail Global Recovery, Warns IMF: These Are The Countries Set To Get Hit Hardest
BY Benzinga | ECONOMIC | 04/14/26 11:27 PM EDTThe global economy is facing renewed challenges as conflict in the Middle East threatens to derail growth and slow the pace of disinflation, according to the International Monetary Fund.
In its latest World Economic Outlook report, the IMF projects global growth will slow to 3.1% in 2026 before edging up to 3.2% in 2027, assuming the conflict remains limited in scope and duration. Inflation is expected to rise slightly in 2026 before resuming its downward trajectory the following year. Emerging markets and developing economies are likely to bear the brunt.
<figure class="wp-block-table">| 2025 | 2026 | 2027 | |
| Global Economy | 3.4% | 3.1% | 3.2% |
| United States | 2.1% | 2.3% | 2.1% |
| Euro Area | 1.4% | 1.1% | 1.2% |
| Japan | 1.2% | 0.7% | 0.6% |
| United Kingdom | 1.3% | 0.8% | 1.3% |
| Canada | 1.7% | 1.5% | 1.9% |
| India | 7.6% | 6.5% | 6.5% |
| China | 5.0% | 4.4% | 4.0% |
| Brazil | 2.3% | 1.9% | 2.0% |
| Mexico | 0.6% | 1.6% | 2.2% |
| Middle East and Central Asia | 3.6% | 1.9% | 4.6% |
*Table Showing Real GDP, Annual Percentage Change ? Courtesy IMF
Downside Risks Loom Over Economic Outlook
The agency warns that a prolonged or expanding conflict in the Middle East could disrupt energy markets, fuel inflation, and unsettle financial systems. At the same time, growing geopolitical fragmentation, renewed trade tensions, and uncertainty around the pace of productivity gains from artificial intelligence could further dampen global growth.
High public debt levels and weakening institutional credibility will further heighten vulnerabilities. However, faster-than-expected gains from AI or easing trade tensions could provide some upside to growth.
To navigate the current shock and prepare for future disruptions, policymakers must stay flexible, uphold credible policy frameworks, and strengthen international cooperation in an increasingly uncertain world.
The IMF highlighted that rising defense spending, driven by geopolitical tensions, may support short-term growth but also risks fueling inflation, undermining fiscal sustainability, and crowding out essential social investments, potentially leading to longer-term economic and social challenges.
The report indicated that when conflicts erupt, they leave lasting economic scars, forcing difficult trade-offs that extend well beyond the immediate impact of war.
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Disclaimer:?This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
