IMF Releases Latest Economic Forecasts; Global Recession Expected to Be Milder

The International Monetary Fund (IMF) warned in a new edition of its economic outlook that as emergency oil reserves dwindle and government budgets come under pressure, the global economy may soon test the limits of its resilience. The post Latest IMF Forecasts: Global Recession Expected to Be Milder first appeared on Safir Arjan.

According to Ambassador Arjan, this fund announced in the half-yearly report "World Economic Outlook" that the global growth in the last 6 months has resisted the Khor Ramianeh conflict better than expected. However, the global lender warned that emergency reserves are now running out and that high levels of debt and budget deficits in many countries may severely reduce governments' ability to protect consumers against any potential price spikes in the future.

"Without strengthening supply capacity and rebuilding policy buffers, the global economy may soon test the limits of its resilience," the IMF report said. "Inventories in energy markets are declining, and further geopolitical shocks could still quickly transmit their effects through price volatility and supply disruptions."

The International Energy Agency announced the largest-ever release of emergency oil reserves in March this year and promised to speed up the process after a meeting of oil ministers last month.

But in a sign of the system's vulnerability, reports suggest that US strategic oil reserves recently fell to their lowest level since 1982.

Last week, Donald Trump agreed with Russian President Vladimir Putin to temporarily lift sanctions on Russian diesel imports to the U.S. to lower fuel prices at the gas station, but analysts said the move would have little "meaningful" impact.

The World Economic Report was published on Tuesday in Bangkok, which is the venue for the annual meetings of the International Monetary Fund and the World Bank this week, with the presence of finance ministers and heads of central banks from 191 IMF member countries.

"The global economy has been resilient, but this resilience is approaching its ultimate limits," IMF chief economic adviser Silvana Tenrero said at the launch of the report in Bangkok. He urged the policymakers to "move from the stage of merely managing the situation to rebuilding".

According to the Guardian report, before the meeting, the head of the International Monetary Fund, Kristalina Georgieva, pointed out the increase in the level of global debt, and called on governments to implement fiscal discipline policies. He said: "We cannot delay necessary policy actions any longer; You have the tools, now you need to apply the wisdom to use them."

In the report, the International Monetary Fund slightly raised its forecast for global economic growth this year to 3.1 percent from the 3 percent rate it estimated in July, but down from the 3.5 percent rate late last year. The growth forecast for next year remains unchanged at 3.4%.

The International Monetary Fund left global inflation unchanged at 4.7 percent for 2026, but forecast inflation to reach 4.1 percent in 2027, up from the 3.9 percent forecast in July. At that time, it was assumed that the Strait of Hormuz would be reopened by mid-July and the situation would return to the situation before the military aggression of the United States and the Zionist regime to Iran by March 2027.

The overall growth of the global economy has also become increasingly unbalanced. Currently, 32 economies account for 95% of global growth; Meanwhile, in April, this number was 54 economies.

Countries that are less affected by the supply shock caused by the imposed war against Iran and respond to the demand arising from artificial intelligence, maintain or strengthen their position. Taiwan's economic growth is expected to reach 10.7% and South Korea's to 3.3% this year.

Also, the US economy is expected to grow by 2.3% in 2026 and 2027 with the support of private sector consumption, fiscal policies and investment in technology.

Energy-importing countries outside the technology supply chain face higher import costs, lower real incomes, and more limited room for fiscal policy. It is estimated that the Eurozone will experience only 1.1% growth this year due to high energy costs and weak consumer confidence. It is predicted that the economy of the Middle East and Central Asia will shrink by 0.3 percent this year; So that Bahrain, Iraq, Kuwait and Qatar will face double-digit decline and then in 2027 they will see double-digit improvement and growth.

China's economic growth is expected to be 4.5% this year and 4% in 2027. Of course, higher oil prices and structural challenges put pressure on the country's economic activities. Growth of 4.3 percent in the second quarter of the year was weaker than expected, as a slowdown in the consumption sector and problems in the housing sector overshadowed strong exports.

India remains the fastest growing among major economies, with the International Monetary Fund projecting growth of 7 percent in 2026 and 2027. These figures were up 0.6 and 0.3 percentage points, respectively, from the July forecast, driven by strong domestic demand, service sector activity and AI-related investments.

The International Monetary Fund stated: "The global economy is not simply slowing down or accelerating, but economic growth is being redistributed among countries based on their vulnerability to the supply shock caused by the war (imposed against Iran) and the strength of AI-related demand."

The International Monetary Fund noted that while AI has helped boost economic resilience, the boom in investment in the field has also increased inflationary pressures and financial fragility. "This is a large and premature demand shock," the report said, which would see large investments flowing into sectors such as semiconductors, data centers and power generation before any large-scale gains in productivity were realized.

A possible re-evaluation of the profitability and productivity outlook related to artificial intelligence could lead to the withdrawal of excessive investments and a sharp correction in stock prices. The International Monetary Fund warned that if productivity gains from artificial intelligence do not materialize, stock values ​​in the US could fall by 20% and global economic growth by 2028 would be 1.1% (and 1.7% in Asia) below baseline estimates.

Benchmark bond yields in advanced economies rose to their highest levels in decades, the International Monetary Fund said, as factors such as reviving inflation, the expected path of policy interest rates and fiscal worries pushed up borrowing costs. Tech companies borrowing to finance investments in AI are also adding to the pressure.

According to CNBC, public debt in advanced economies is expected to rise from 108% of GDP in 2025 to 115% in 2031. In emerging and developing economies, this figure is expected to increase from 74% to 84%. Primary budget deficits in the largest economies are still far higher than before the pandemic, and governments are facing increased pressure from defense spending, higher real interest rates and shorter debt maturities.