The International Monetary Fund (IMF) released its World Economic Outlook for July on Wednesday. The IMF expects sluggish growth for the global economy this year amid heightened geopolitical tensions, which has inflation surging higher. In response, the IMF downgraded its projection for global economic growth this year. Despite the US and Iran reaching an interim peace deal, attacks have escalated in recent days, reigniting concerns about a prolonged conflict and another pick-up in oil prices.

• The IMF projects the global economy to expand by 3.0% this year, which is down from its earlier projection of 3.1%. Either way, the IMF expects growth to slow from the 3.5% expansion in 2025.
• The economic organization believes that the energy crisis, caused by escalating tensions in the Middle East, will weigh on economic growth this year. Higher prices are weighing on oil importers and exposed economies.
• On the other hand, the IMF believes growth will be supported by strong demand and spending on artificial intelligence technology, which is bringing more countries into the global supply chain.
• The IMF expects Canada’s economy to grow by 1.1% this year and 1.7% in 2027, both of which would be down from 2025. Canada’s economy is facing higher energy prices and ongoing trade tensions with the US.
• Looking at prices, the IMF expects global inflation to rise to 4.7% this year. That would mark an increase from 4.1% in 2025.

The conflict in the Middle East, which began at the end of February, has pushed up energy prices, putting pressure on global economic activity. In response, the IMF sees global economic growth expanding at a slower pace this year. Canada’s own economy has been pressured by developments in the Middle East, but it has proven its relative resiliency, thus far seeing an improvement in the second quarter of 2026.

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