Global Economy To Decelerate To 3.1 Pct In 2026 Before Recovering To 3.4 Pct In 2027 - IMF

KUALA LUMPUR, Oct 13 (Bernama) -- Global growth is projected to decelerate to 3.1 per cent in 2026 from 3.5 per cent in 2025 before recovering to 3.4 per cent in 2027, according to the International Monetary Fund (IMF).  

In its October 2026 World Economic Outlook (WEO), the IMF said the global economy is not simply slowing or accelerating; rather, growth is being reallocated across countries according to their exposure to the war-induced supply shock and artificial intelligence (AI)-related demand strength.

"The reopening of the Strait of Hormuz is assumed to resume in March 2027, with a return to prewar conditions broadly by October 2027. 

"This assumption implies a gradual restoration of production, shipping, insurance, and payment arrangements rather than immediate normalisation of energy flows," said the IMF, adding that the policy and geopolitical uncertainty are assumed to remain elevated through 2027.

It said energy prices are projected to remain higher than before the war, with the average petroleum spot price index in 2026 projected at US$96 a barrel, 16 per cent higher than assumed under the reference forecast in the April 2026 WEO. 

Natural gas prices, measured using Title Transfer Facility futures, are projected at US$20 a million British thermal units, or roughly 36 per cent higher than the April reference forecast price. 

At the same time, the global technology cycle driven by AI is expected to stabilise, with productivity growth generally projected to remain consistent.

IMF said fiscal policy in emerging market and developing economies is expected to tighten gradually. 

On global inflation, the IMF projects headline inflation to rise to 4.7 per cent in 2026 from 4.1 per cent in 2025, before easing to 4.1 per cent in 2027. 

In emerging market and developing economies, which Malaysia is in, growth is projected to slow to 3.7 per cent in 2026 from 4.5 per cent in 2025, before recovering to 4.4 per cent in 2027. 

"The outlook is heterogeneous, reflecting differences in commodity dependence, geographic exposure to the West Asia conflict, remittances and tourism receipts, financial conditions, policy frameworks, and position in the global technology value chain," it said. 

IMF added that several Southeast Asian economies are projected to benefit from data centre activity and the upturn in the global technology cycle and, in some cases, from emergency fiscal measures.

-- BERNAMA