Global growth stalling, warns IMF

By the Editorial Team · Wednesday, October 14, 2026

The IMF warned that ongoing inflation and rising borrowing costs could slow global growth despite a forecasted 3.1 percent expansion in 2026, citing risks from persistent energy market disruptions due to the Middle East conflict. To avoid a sharper downturn, the Fund urged governments to reduce debt levels and central banks to maintain restrictive monetary policies to keep inflation in check.

The International Monetary Fund (IMF) has cautioned that while the global economy has so far shown resilience amid the most severe energy shock in decades, unchecked inflation and rising borrowing costs could trigger a pronounced slowdown. In its latest World Economic Outlook released this week, the IMF maintained its forecast for global growth at 3.1 percent in 2026, down from 3.5 percent in 2025 but still relatively robust given ongoing geopolitical tensions affecting energy markets.

The baseline projection assumes a gradual normalization of energy supplies following disruptions caused by the conflict in the Middle East. Under this scenario, the United States economy is expected to expand by 2.3 percent in both 2026 and 2027, steady from previous estimates. Growth in the eurozone and the United Kingdom is also anticipated to hold broadly steady. Global headline inflation is forecast to rise to 4.7 percent this year, consistent with the IMF’s July outlook, marking an increase from 4.1 percent in 2025.

However, the IMF warned that if the war persists and commodity prices remain elevated, resulting in higher borrowing costs, the global economy could face significantly weaker growth coupled with intensified inflationary pressures. Silvana Tenreyro, the IMF’s chief economist, highlighted the mounting risks associated with sharp increases in borrowing costs in advanced economies, historic high public debt levels, and diminishing fiscal space after successive crises. “The global economy could soon test the limits of resilience,” she said.

In a downside scenario where fiscal and monetary credibility falters amid sustained commodity price rises, the IMF projects that global growth could be lowered by 0.2 percentage points in 2026 and by 0.5 percentage points in 2027. Approximately two-thirds of this reduction would stem from prolonged disruptions to oil and gas markets, which would weigh heavily on household incomes and business investments. The same energy price pressures would drive inflation higher, with a projected increase of 1.1 percentage points in 2027.

To mitigate these risks, the IMF recommended urgent efforts to restore public debt to sustainable levels and cautioned policymakers to contain inflation risks while guarding against financial fragility. The Fund stressed the importance of reducing borrowing to preserve the capacity to respond to potential future shocks. “Given elevated debt, rising sovereign yields, and pressing spending needs, a renewed focus on rebuilding fiscal space is increasingly urgent,” the IMF said.

On the monetary front, the Fund advised central banks to maintain a firm stance on price stability. Tenreyro emphasized that interest rates need to remain sufficiently restrictive to bring inflation back to target promptly. Should commodity price increases or technology-related investments continue to add to cost pressures, further tightening by central banks may be necessary.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.