IMF Warns Global Economy Nears Breaking Point As Oil Reserves Shrink, Raises 2026 Growth Forecast To 3.1 Per Cent

The global economy could soon reach the limits of its resilience as emergency oil reserves shrink and heavily indebted governments struggle to cushion future shocks, the International Monetary Fund (IMF) has warned.

In its World Economic Outlook released on Tuesday in Bangkok, where the IMF and World Bank are holding their annual meetings, the Fund said global growth had weathered the US-Iran conflict better than expected.

Oil reserves dwindle amid conflict

Rerouted oil supplies avoiding the Strait of Hormuz and releases from strategic reserves helped contain price increases. However, energy inventories are dwindling, while high public debt and budget deficits leave governments with limited room to protect consumers.

“Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience,” the IMF warned.

The International Energy Agency announced record emergency oil releases in March and pledged to accelerate them last month. Meanwhile, the US strategic petroleum reserve reportedly fell to its lowest level since 1982.

Last week, Donald Trump reached an agreement with Vladimir Putin to temporarily lift sanctions on US imports of Russian diesel to ease pump prices, although analysts questioned its likely impact.

Presenting the report, IMF economic counsellor Silvana Tenreyro said, “the global economy has been resilient, but that resilience is reaching its limits”, urging policymakers to “move from just coping, to rebuilding”.

IMF Managing Director Kristalina Georgieva also called for fiscal restraint amid rising debt, warning governments against delaying necessary action.

IMF raises global growth forecast

The Fund raised its global growth forecast for 2026 to 3.1%, from 3% in July, while maintaining its 2027 projection at 3.4%.

US growth is projected at 2.3% in both years, with the 2027 estimate raised from 2.2%.

For the UK, the IMF increased its 2026 growth forecast to 1.3%, up 0.3 percentage points from July, offering encouragement to Chancellor John Healey ahead of his expected arrival in Bangkok.

However, it reduced the UK’s 2027 forecast to 1.2%, from 1.3%, citing pressure from sustained energy costs and higher long-term interest rates on household spending and investment.

Middle East tensions threaten recovery

The IMF said global risks remained tilted towards weaker growth, particularly if the Middle East conflict became prolonged or escalated, pushing energy and food prices higher.

“Further disruptions to energy infrastructure, cyber-attacks, or extreme weather events could amplify these effects,” it warned.

Trump has continued to threaten further strikes against Iran in the coming weeks, with little indication of progress towards a peace agreement.

Inflation pressures and AI risks persist

Persistently elevated oil prices are also expected to prolong inflation. The IMF forecast global inflation at 4.7% in 2026, unchanged from July, and 4.1% in 2027, slightly above its previous 4% projection.

It advised central banks against reacting excessively to temporary inflation spikes, while remaining prepared to act if price pressures became entrenched.

“With economic conditions in flux, agility is at a premium,” the Fund said.

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Beyond energy disruptions and strained government finances, the IMF also highlighted the possibility of an artificial intelligence-driven market crash as another threat to the global outlook.

The report stressed that depleted buffers could magnify another sudden shock.

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