The International Monetary Fund has cut its forecast for global economic growth in 2026 to 3%, citing the fallout from the war in the Middle East, while projecting that Latin America and the Caribbean would grow 2.4% this year and 2.7% in 2027, according to the Fund's World Economic Outlook report.

The report published on July 8 showed global output slowing to 3% in 2026 from an estimated 3.5% in 2025, before rebounding to 3.4% in 2027. The 3% global figure represented a downward revision from the 3.1% growth the Fund had projected for 2026 in April, as gains from artificial intelligence investment failed to fully offset the economic damage from the conflict between the United States, Israel and Iran.

"Our forecasts remain globally unchanged... We have a V-shaped recovery, which will simply be more pronounced than we had previously anticipated," Deniz Igan, head of research at the Fund, told AFP.

Latin America outlook

Regional GDP was expected to evolve this year in line with 2025, with only a "modest" acceleration forecast for 2027, the WEO report said, adding that growth would remain uneven across the region's major economies.

Argentina was projected to lead the region with growth of 3.5% in 2026 and 4% in 2027 - forecasts left unchanged from April. Brazil's economy was seen expanding 2.4% this year and 2.2% next year, revisions of 0.5 and 0.2 percentage points higher, respectively, than the Fund's April estimates. Mexico was projected to accelerate to 1.2% growth in 2026 and 1.9% in 2027, from an estimated 0.5% in 2025, even though both figures were cut by 0.4 and 0.3 percentage points from April.

“Growth in Brazil is expected to remain resilient in 2026 but to slow somewhat next year. In Mexico, growth is projected to accelerate modestly amid less restrictive domestic policies, but uncertainty will continue to constrain activity,” the Fund said in the report.

On Argentina, Petya Koeva Brooks, deputy director of the Fund's Research Department, described the outlook as “positive” given the country's macroeconomic performance. During the July 8 press conference, Koeva Brooks said Argentina's disinflation process should continue gradually, with the Fund forecasting inflation of 25% by year-end.

Trade and prices

Global trade growth was projected to slow "drastically" to 3.5% in 2026 from 5% in 2025, before recovering to 4.3% in 2027, the WEO report said, attributing the pattern to front-loaded activity around tariff implementation and the gradual redirection of trade and production chains.

Global inflation was revised up by 0.3 percentage points to 4.7% for 2026, before easing to 3.9% in 2027, an upward revision of 0.2 points, the Fund said, pointing to energy and food prices as the main drivers. Igan told AFP the increase was largely temporary. "Inflation is mainly driven by rising energy and food prices, and the data already shows that it is slowing down," he said. The euro zone's growth forecast was cut by 0.2 percentage points. The United States, buoyed by AI-related investment, retained a growth forecast of 2.3%.