IMF Warns That Developing Countries will Lose in the Market Turmoil

Persistent conflicts, high energy costs and technological upheavals will slow global growth and raise prices, the organization forecast.

·         Global Growth: The International Monetary Fund (IMF) projects global growth of 3.1% in 2026 and 3.4% in 2027, but warns that these averages conceal widening disparities among economies.

·         Major Economic Risks: Persistent geopolitical conflicts, high energy prices, US tariffs, climate change, cyberattacks and rapid technological disruption are increasing global economic uncertainty.

·         Inflation Outlook: Global inflation is forecast to reach 4.7% in 2026, easing to 4.1% in 2027, as higher fuel and energy prices strain household budgets.

·         Middle East Conflict: A prolonged conflict could intensify inflation and slow economic growth. Disruptions to oil and gas supplies are expected to affect the Persian Gulf for another year.

·         Vulnerable Economies: Low-income countries dependent on oil imports and lacking competitive technology sectors face greater risks of economic losses and widening income inequality.

·         Country-wise Growth Forecasts:

·         Gulf Economies: Bahrain, Iraq, Kuwait and Qatar are projected to suffer double-digit declines in total output in 2026 due to disruptions in oil and gas trade, with recovery expected in 2027.

·         Saudi Arabia: The IMF projected a 3.3% economic contraction in 2026, followed by 7.9% growth in 2027. The forecast was prepared before the latest attacks.

·         Climate and Cybersecurity: Extreme heat and drought have disrupted production and supply chains, while cyberattacks threaten critical infrastructure and business operations.

·         Artificial Intelligence: AI could boost productivity and profits, but uncertainty persists over its potential impact on employment and economic stability.

·         IMF's Policy Recommendation: Governments should provide temporary and targeted assistance to households and businesses affected by high prices, avoiding excessive public spending amid rising debt and borrowing costs.

·         Employment Challenge: World Bank President Ajay Banga warned that approximately 1.2 billion young people in emerging economies will reach working age over the next 12–15 years, creating an urgent need for job creation.

·         Role of Private Investment: With foreign assistance declining, private investment is considered essential for emerging economies to generate growth and employment.

Key takeaway: Global growth remains relatively stable, but geopolitical conflicts, energy insecurity, inflation and technological disruption are widening economic disparities. India is projected to maintain strong growth, while vulnerable, energy-import-dependent economies face greater risks.

 

[ABS News Service/13.10.2026]

Stubborn conflicts, high energy prices and rapid technological disruptions are deepening the divide between economic winners and losers across the globe, the International Monetary Fund warned on Tuesday in Bangkok.

Overall growth is lackluster but stable — 3.1 percent this year and 3.4 percent in 2027, the fund forecasts. But the average, it pointed out, “masks a reallocation of growth across economies.”

Countries, particularly low-income ones, that are dependent on oil imports and lack competitive tech-related sectors face an increased risk “that recent shocks will widen income gaps across and within countries.”

High energy and fuel prices will continue to take a bite out of households’ ability to pay their bills. The fund estimates that inflation will increase to 4.7 percent this year and 4.1 percent next year.

“A prolonged conflict in the Middle East could put additional pressures on inflation and slow down growth,” said Silvana Tenreyro, the fund’s chief economist. “The economy has been resilient, but that resilience is reaching its limits,” she added.

The World Economic Outlook was released as top economic policymakers gathered in Bangkok this week for the annual meetings of the I.M.F. and the World Bank.

The unceasing economic shocks related to the ongoing war in Ukraine, conflict in the Middle East, President Trump’s tariffs and the collapse of a cooperative international economic order are roiling rich and poor countries as governments struggle to deal with conditions over which they often have limited control.

In France, the violent protests over decrepit schools and underpaid teachers are rooted in larger economic problems related to crushing public debt, high borrowing costs, elevated fuel prices and political discontent.

France was one of the few countries in the euro area whose outlook was downgraded from the fund’s previous report this year.

But the larger economic travails are dogging every nation.

Uncertainty is the watchword. There is little sign of a resolution in the Middle East as violence surged over the weekend with Houthi attacks on Saudi Arabia and strikes in Yemen.

Climate change is taking a toll. Intense heat and drought already disrupted supply chains and production this summer. Estimates of damage from El Niño could drag down global growth by trillions of dollars over time.

Cyberattacks also threaten to upend critical operations and undermine confidence—something France got a taste of this week when hackers hit French supermarkets and raised temperatures in refrigerators and freezers.

And speculation over the kind of upheaval artificial intelligence might cause ranges from supercharging productivity and profits to eradicating most jobs or even the human race.

The I.M.F. acknowledged that governments would be pressured to ease the burden of higher prices on households and businesses. But the fund’s economists sternly warned against overspending in a world of soaring debt and high borrowing costs, recommending assistance that is temporary and targeted.

In the United States, the fund is forecasting growth of 2.3 percent this year and next. Among countries that use the euro, growth is expected to reach only half that level. Britain does not fare much better, with estimated growth of 1.3 percent this year and a notch less next year.

In China, growth is expected to slow this year to 4.5 percent as the country strains to manage higher energy costs, a weak property sector and low levels of domestic consumption.

India is among the fastest-growing major economies, with growth projected to reach 7 percent this year. Other Southeast Asian countries are getting a boost from growth in data centers and other technology-related investment.

In the Middle East, Bahrain, Iraq, Kuwait and Qatar have all been gut-punched by the interruption of their oil and gas trade, and are expected to suffer double-digit drops in their total output this year, the fund said. They are expected to make up those losses next year as conditions get back to normal.

The forecast for Saudi Arabia, completed before the recent attacks, estimated that the country’s more diversified economy would contract 3.3 percent this year before growing 7.9 percent in 2027.

It will take another year before conditions in the Persian Gulf return to prewar levels, the fund estimated. In the meantime, shortages are likely to persist even as oil production and delivery revive.

Poorer and developing nations will be most affected because they lack the resources to compete for limited supplies with richer countries.

“What’s happening is that every country has now suddenly figured out that energy security is national security,” said Ajay Banga, president of the World Bank.

Mr. Banga also focused on longer-term development issues. “We’ve got this demographic bulge coming,” he said. Over the next 12 to 15 years, roughly 1.2 billion young people in emerging economies will reach working age, but jobs won’t exist for most of them.

With foreign assistance from rich countries shrinking, Mr. Banga emphasized that private investment is the only way for emerging markets to spur economic growth and create jobs.

“It’s the math of development,” he said.