World Economic Outlook April 2026: Global Economy in the Shadow of War

World Economic Outlook

Global Economy in the Shadow of War

April 2026

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The global economy faces renewed tests as the war in the Middle East threatens to disrupt growth and disinflation.

After withstanding higher trade barriers and elevated uncertainty last year, global activity now faces a major test from the outbreak of war in the Middle East. Assuming that the conflict remains limited in duration and scope, global growth is projected to slow to 3.1 percent in 2026 and 3.2 percent in 2027. Global headline inflation is projected to rise modestly in 2026 before resuming its decline in 2027. Slowdown in growth and increase in inflation are expected to be particularly pronounced in emerging market and developing economies.

Downside risks dominate the outlook. A longer or broader conflict, worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial‑intelligence‑driven productivity, or renewed trade tensions could significantly weaken growth and destabilize financial markets. Elevated public debt and eroding institutional credibility further heighten vulnerabilities. At the same time, activity could be lifted if productivity gains from AI materialize more rapidly or trade tensions ease on a sustained basis.

Fostering adaptability, maintaining credible policy frameworks, and reinforcing international cooperation are essential to navigating the current shock while preparing for future disruptions in an increasingly uncertain global environment. As Chapter 2 shows, scaling up of defense spending prompted by a rise in geopolitical tensions could boost economic activity in the short term but also bring about inflationary pressures, weaken fiscal and external sustainability, and risk crowding out social spending, which could in turn ignite discontent and social unrest. As Chapter 3 demonstrates, where conflict erupts, acute macroeconomic trade-offs and scarring follow and last well beyond the immediate wartime shock.

The estimates and projections in the April 2026 World Economic Outlook Chapter 1 and Statistical Appendix are based on statistical information available through April 1, 2026, but may not reflect the latest published data in all cases.

The compiled full report (PDF) of the April 2026 World Economic Outlook will be available online by April 30, 2026.

• Assumptions and Conventions
• Executive Summary
• Foreword
• IMF Executive Board Discussion of the Outlook
• Blog
• Press Briefing
• April 2026 Database

Projections Table

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Chapters in the Report

Chapter 1: Global Prospects and Policies

The global economy is again disrupted, this time with the outbreak of war in the Middle East. Rising commodity prices, firmer inflation expectations, and tighter financial conditions are testing the recent resilience. Under the assumption of a limited conflict, global growth is projected at 3.1 percent in 2026 and 3.2 percent in 2027, below recent outcomes and well under prepandemic averages. Global inflation is expected to tick up in 2026 and resume its decline in 2027. Pressures are concentrated in emerging market and developing economies, especially commodity importers with preexisting vulnerabilities. Risks are decisively on the downside. A prolonged conflict, deeper geopolitical fragmentation, disappointment over AI-driven productivity, or renewed trade tensions could weaken growth and unsettle markets. High public debt and eroded policy buffers add vulnerability. Policies should foster adaptability, enhance credibility, and reinforce international cooperation.

• Read Chapter 1
• Chapter 1 Data

• 
  Press Briefing

• 
  Online Annex

• 
  Blog

• 
  April 2026 Database

Chapter 2: Defense Spending: Macroeconomic Consequences and Trade-Offs

Defense spending is rising amid intensifying geopolitical tensions. This chapter finds that large defense spending booms have become more frequent, especially in emerging market and developing economies. In a typical boom, defense outlays increase by about 2.7 percentage points of GDP over two-and-a-half years, with roughly two-thirds financed through deficit. While defense buildups can boost economic activity in the short term, they also temporarily increase inflation and create significant medium-term challenges. Fiscal deficits worsen by about 2.6 percentage points of GDP, public debt increases by about 7 percentage points within three years, and external balances deteriorate. Wartime booms are especially costly, with public debt jumping by about 14 percentage points and social spending falling. Defense spending multipliers are close to 1, on average, but vary widely depending on how spending is sustained, financed, and allocated and how much equipment is imported.

• Read Chapter 2
• Chapter 2 Data

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  Chapters 2 and 3 Blog

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  Online Annexes

• 
  Panel Discussion

Chapter 3: The Macroeconomics of Conflicts and Recovery

Armed conflicts generate profound macroeconomic consequences beyond their devastating human toll. This chapter leverages global data on post–World War II conflicts to assess the economic implications of wars. The analysis shows that conflicts generate large and persistent output losses in economies where fighting occurs—exceeding those from financial crises or severe natural disasters—alongside nonnegligible spillovers to other countries. These losses trigger acute macroeconomic trade-offs across monetary, fiscal, and external sectors and leave long-lasting scars. Economic recoveries are slow and uneven, depending critically on sustained peace. Even when peace holds, recoveries remain modest relative to wartime losses, led primarily by labor, while capital and productivity stay subdued. Early macroeconomic stabilization, debt restructuring, international support, and domestic reforms to rebuild institutions are essential. Comprehensive policy packages that jointly reduce uncertainty and rebuild capital stock generate positive externalities for stronger recovery.

• Read Chapter 3
• Chapter 3 Data

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  Chapters 2 and 3 Blog

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  online annexes

• 
  Panel Discussion

Statistical Appendix

Statistical Appendix:

Data assumptions, conventions, and classifications

Statistical Appendix A:

Key Global Economic Indicators

Statistical Appendix B:

Supplemental Global Economic Indicators

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April 2026 Database

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Videos

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The Macroeconomics of Defense Spending, Conflicts, and Recovery

• April 6, 2026
• 37:28

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World Economic Outlook, April 2026: Three Essential Questions

• April 13, 2026

• 2:32

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Video Transcript

The global economy was on a steady growth trajectory, around 3 .3 % in recent years, and we were looking to upgrade our projections. The war has stopped that momentum, and we now project growth of 3 .1 % this year under our reference forecast, with inflation rising to 4 .4%, a sharp departure from the previous trend. The economic impact will depend on the duration and size scale of the conflict and could be worse under our adverse and severe scenarios as we show in our report. It will be highly uneven across countries, hitting countries in the conflict region, commodity importing low -income countries and emerging market economies hardest through three channels. First, higher energy and food prices themselves. Second, persistence in wage and price inflation. And third, a confidence shock. that tightens financial conditions. Risks are firmly to the downside, including a further escalation of the war, new trade tensions, or a reassessment of the profitability of AI investments. On the other hand, a swift resolution of the war, productivity gains from a faster adoption of AI, or easing in trade tensions could uplift the global economy. Central banks need to communicate clearly their readiness to act if needed. However, if the conflict is short -lived and inflation expectations remain well anchored, they can afford to wait and assess. With very little room left, fiscal policy must act prudently. Any fiscal support should be targeted to the most vulnerable and temporary with clear sunset clauses. Importantly, fiscal policy should not complicate the task for central banks. Beyond the immediate measures to contain the crisis, countries should also use this opportunity to invest in energy security through investment in renewables. With the right policies and stronger global cooperation, the damage can be contained.