The International Monetary Fund expects the global economy to expand by a sluggish 3% this year, constrained by the ongoing Iran war but supported by advances in artificial intelligence, the organization announced July 8, 2026.
Iran conflict drags on growth
The IMF's latest World Economic Outlook cites geopolitical tensions stemming from the Iran war as a primary drag on output, disrupting energy markets and trade routes. The 3% projection is below the historical average of 3.8% and marks a slowdown from 2025's estimated 3.3% growth.
Jeremy Kronick, president and CEO of the C.D. Howe Institute, told BNN Bloomberg that the conflict has fueled inflation and uncertainty. "The Iran war is exacerbating supply chain bottlenecks and raising costs for businesses worldwide," Kronick said.
AI provides a lift
Despite headwinds, the IMF notes that rapid adoption of artificial intelligence technologies is boosting productivity in sectors like finance, manufacturing, and logistics. AI-related investments have accelerated in North America and parts of Europe, partially offsetting the drag from higher energy prices and defense spending.
The report emphasizes that the net effect of AI on employment and inequality remains uncertain, but near-term gains are visible in automation and data analytics.
Regional variations
Advanced economies are expected to grow at a modest 1.6%, while emerging markets may see 4.1% expansion. The United States is forecast to grow 2.1%, the euro area 0.9%, and China 4.8%. The IMF warns that prolonged conflict could push global growth below 2.5%.
"The outlook is fragile," the IMF stated. "A ceasefire in the Iran theater would significantly reduce downside risks."
