The IMF said the slowdown reflected the negative impact of the war in the Middle East, partially offset by higher demand. It is created by a global technological cycle driven by advances in artificial intelligence (AI). Global inflation is expected to increase from 4.1 percent in 2025 to 4.7 percent in 2026, and then decline to 3.9 percent in 2027, indicating that the deflation trend seen since the beginning of 2024 has stalled.
War and investments in artificial intelligence shape global prospects
The IMF said global growth is being shaped by two opposing forces: a negative supply shock caused by the conflict in the Middle East, and a positive demand shock caused by the rapid adoption of artificial intelligence and investments in technology. Although the global economy has so far proved more resilient than expected, the performance of countries varies depending on their exposure to high energy prices and their position in the global technological value chain. Energy exporters outside the conflict zone benefit from improved terms of trade, while countries with strong technology sectors also perform better despite higher energy costs. Conversely, energy importing countries with limited participation in the technology sector face weaker economic activity.
Commodity prices remain high, despite declining from their April peaks after the cease-fire and the achievement of mutual understanding between Iran and the United States. Energy prices are estimated to remain about 25 percent above pre-war levels. The IMF expects the average spot price of oil to reach $89 per barrel in 2026, representing a 32 percent increase over 2025, while natural gas prices are projected to rise by 22 percent.
Global financial conditions have softened since April, despite expected higher political interest rates. Strong corporate earnings, especially among AI-related companies, supported stock markets, while interest rate expectations increased in response to higher inflation. The IMF noted,
