Global Economic Growth Expected to Slow to 3.1 Per Cent This Year Before Recovering in 2027 – IMF
KUALA LUMPUR: Global economic growth is projected to slow to 3.1 per cent this year 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 neither uniformly slowing nor accelerating. Instead, growth is being redistributed across countries depending on their exposure to war-related supply shocks and the strength of demand associated with artificial intelligence (AI).
“The Strait of Hormuz is expected to reopen in March 2027, with conditions broadly returning to pre-war levels by October 2027.
“This assumption implies a gradual recovery in production, shipping, insurance and payments following the immediate normalisation of energy flows,” the IMF said, adding that policy and geopolitical uncertainty is assumed to remain elevated heading into 2027.
Energy prices are projected to remain higher than pre-war levels, with the average petroleum price index forecast at US$96 per barrel in 2026, 16 per cent above the baseline assumption in the April 2026 WEO.
Natural gas prices, measured using Title Transfer Facility (TTF) futures, are projected at US$20 per million British thermal units, approximately 36 per cent higher than the April baseline forecast.
At the same time, the AI-driven global technology cycle is expected to remain strong, with productivity growth generally projected to stay consistent.
The IMF said fiscal policies in emerging market and developing economies are expected to tighten gradually.
On global inflation, the IMF projected that inflation would rise to 4.7 per cent in 2026 from 4.1 per cent in 2025 before easing to 4.1 per cent next year.
In emerging market and developing economies, a group that includes Malaysia, 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, geographical exposure to the Middle East conflict, remittances and tourism receipts, financial conditions, policy frameworks and positions within global technology value chains,” the IMF said.
The IMF added that several Southeast Asian economies are projected to benefit from data centre activities and an upturn in the global technology cycle, as well as, in some cases, emergency fiscal measures.
BERNAMA