The IMF’s “adverse scenario” looks increasingly likely
The International Monetary Fund cut its growth outlook on Tuesday, April 13, due to Middle East war-driven energy price spikes. IMF presented three growth scenarios: weaker, worse and severe, depending on how the war unfolds.
The IMF chose the most benign scenario for its World Economic Outlook “reference forecast,” which assumes a short-lived conflict and oil prices normalizing in the second half of 2026, with an $82 per-barrel average for the year.
Just minutes after releasing the outlook, IMF chief economist Pierre-Olivier Gourinchas said it may be already outdated. He told reporters that with continued energy disruptions and no clear path to end the conflict, the IMF’s “adverse scenario” looks increasingly likely.
The IMF’s worst-case “severe scenario” assumes an extended and deepening conflict and much higher oil prices that prompt major financial market dislocations and tighter financial conditions, slashing global growth to 2.0%. The global economy teeters on the brink of recession, with oil prices averaging $110 a barrel in 2026 and $125 in 2027.
The euro zone, still struggling with higher energy prices caused by Russia’s 2022 invasion of Ukraine, takes a bigger hit from the Middle East conflict, with its growth outlook falling 0.2 percentage points in both years to 1.1% in 2026 and 1.2% for 2027.
Britain’s economy was now on course to grow by only 0.8% in 2026, down from a previous projection of 1.3%.
The IMF forecast China’s growth for 2026 at 4.4%, down a tenth of a point from January as the higher energy and commodity costs are partly offset by lower U.S. tariff rates and government stimulus measures.
Source: reuters.com