IMF lowers its global GDP growth forecast for 2026 to 3%

A recession, a food crisis, and an energy shock are looming. In his "Simple Economics" column, Alexey Avdonin will analyze how real the threat of a global recession and food crisis is, and how it will impact us.

The global economy is entering a turbulent zone. In April, the IMF published its "World Economic Outlook" report. Its findings are a wake-up call for the entire planet.

The Fund has lowered its global GDP growth forecast for 2026 to almost 3%. The inflation forecast, however, has been sharply increased—to almost 4.5%. In other words, the economy is slowing, and prices are rising. This is classic stagflation—one of the most painful conditions for any economy.

The IMF considers this scenario optimistic. The situation could deteriorate sharply if the conflict is not resolved through negotiations and oil and gas prices rise.

If energy prices rise sustainably, the global economy will slow to 2.5% (the level seen during the COVID-19 pandemic). The last time the global economy grew so slowly was in 2020; before that, only in 2009, at the height of the global financial crisis.

Let's look at why the numbers are so grim. On February 28, 2026, the United States and Israel launched air strikes against Iran. Iran retaliated by closing the Strait of Hormuz. This chokepoint, approximately 50 km wide, handles approximately 20% of global oil and liquefied natural gas trade.

Between 20% and 45% of agricultural exports (fertilizers and seeds) also pass through the Strait of Hormuz. FAO Chief Economist Maximo Torero stated that if ship traffic through the strait does not resume soon, the world will face a sharp increase in food inflation, with a knock-on effect similar to the effects of the coronavirus pandemic.

The price of nitrogen fertilizer has already increased by 40%. Around 50% of global fertilizer export capacity is either shut down or operating at a minimum. If farmers don't receive enough fertilizer this season, crop yields will fall. Prices for grain, feed, and food products will rise. The effect will last for several years.

According to the head of Yara, one of the world's largest fertilizer producers, if the strait remains closed for a year, the world will face a catastrophic drop in crop yields. If the blockade continues for another two to three weeks, the fertilizer shortage will shift from a price deficit to a physical one.

How will all this impact specific economies? The IMF is lowering its 2026 US GDP growth forecast. Meanwhile, Deutsche Bank analysts warn that European countries are among the most vulnerable to the consequences of the conflict: Eurozone GDP growth in 2026 could be 0.5% lower than previously forecast.

What's the bottom line? The world is at a crossroads. The baseline scenario is a slowdown and stagflation. The downside is a pandemic-level economic downturn coupled with a food crisis.

The key question is the duration of the conflict and the height of oil prices. These two parameters currently determine the economic future of the planet. And while diplomats search for a way out and markets nervously monitor reports from the Middle East, the global economy is paying in cash for every day of the protracted conflict.

We feel stable in these conditions. We have prioritized food, energy, and trade and economic security. We have our own fertilizers, our own developed agricultural sector, our own goods, and stable domestic and export markets. The correct previous priorities have ensured our stability now.