- The IMF forecasts global economic growth of 3.1 per cent in 2026, up from its previous estimate of 3 per cent.
- Global inflation is expected to reach 4.7 per cent this year before easing to 4.1 per cent in 2027.
- The Fund warns that higher energy prices and interest rates could slow UK growth to 1.2 per cent next year.
The global economy could soon struggle to withstand another major shock as emergency oil stocks dwindle and governments face mounting financial pressures, the International Monetary Fund (IMF) has warned.
In its latest World Economic Outlook, published on Tuesday (13), the Fund said the global economy had proved more resilient than expected during the Middle East conflict over the past six months. However, it cautioned that the measures used to cushion the impact of the US-Iran war were becoming harder to sustain.
Rerouting oil supplies away from the Strait of Hormuz and releasing strategic energy reserves helped contain the initial impact on oil prices. But with inventories falling and public finances stretched in many countries, governments could have less room to protect households and businesses if energy costs rise again.
“Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience,” the IMF said.
The Fund also warned that geopolitical shocks could quickly trigger fresh price increases and supply disruptions as energy inventories shrink.
The International Energy Agency announced its largest-ever release of emergency oil stocks in March, with further efforts to accelerate the release discussed in October. The United States Strategic Petroleum Reserve has also reportedly fallen to its lowest level since 1982, highlighting the pressure on one of the world's key emergency energy buffers.
Why is the IMF worried about the global economy?
The IMF marginally raised its forecast for global economic growth this year to 3.1 per cent, from 3 per cent in its July update. Its forecast for 2027 remains unchanged at 3.4 per cent.
However, the improved headline figure masks growing risks. The Fund warned that a prolonged conflict or further escalation in the Middle East could push energy and food prices higher, putting additional pressure on consumers and businesses.
It also identified possible disruptions to energy infrastructure, cyber-attacks and extreme weather events as threats that could amplify the economic fallout.
Global inflation is expected to reach 4.7 per cent in 2026 before easing to 4.1 per cent next year. The latter figure is slightly higher than the IMF's previous forecast of 4 per cent, reflecting the prospect of energy costs remaining elevated for longer.
The Fund urged central banks not to overreact to temporary increases in inflation, but to respond quickly if higher prices become entrenched in the economy.
Silvana Tenreyro, the IMF's economic counsellor, said the global economy had been resilient, but that its capacity to absorb further shocks was under strain. She urged policymakers to move beyond short-term crisis management and focus on rebuilding economic buffers.
The IMF has also warned of risks linked to a potential artificial intelligence-driven market correction. Although investment in AI infrastructure has supported economic activity, a sharp reassessment of the technology's commercial prospects could unsettle financial markets and weaken growth.
What does the IMF forecast mean for the UK?
The IMF raised its forecast for UK economic growth in 2026 to 1.3 per cent, up from 1 per cent in July. However, it expects growth to slow to 1.2 per cent in 2027, slightly below its previous estimate of 1.3 per cent.
The Fund warned that prolonged high oil prices and rising long-term interest rates could weigh on household consumption and business investment. Higher energy costs can squeeze disposable incomes while increasing operating expenses for companies, potentially slowing hiring and expansion.
The outlook presents a mixed picture for the UK government. The improved forecast for this year offers some relief, but the weaker projection for 2027 highlights the risk that a prolonged energy shock could undermine economic momentum.
The IMF's managing director, Kristalina Georgieva, has separately urged governments to rein in spending pressures as global debt levels rise. Her warning reflects concerns that countries may have less capacity to introduce costly support measures if another crisis hits.
The Fund said policymakers needed to strengthen energy supply capacity and rebuild the financial buffers that had helped economies absorb the initial shock.
For governments, the challenge is to prepare for another potential disruption without worsening already stretched public finances. For households and businesses, much will depend on whether energy supplies stabilise or renewed geopolitical tensions trigger another sustained increase in prices.
The IMF's message is that stronger-than-expected growth should not be mistaken for lasting security. With emergency stocks declining, debt burdens rising and several risks converging, the global economy may have less room to absorb its next major shock.
