ISLAMABAD: While keeping Pakistan’s growth forecast unchanged at 3.5 per cent for 2026-27, the International Monetary Fund (IMF) on Wednesday said that the renewed Middle East conflict could negatively affect the global economy.

“Global growth is projected to be 3.0pc in 2026 and 3.4pc in 2027, down from the average of 3.5pc observed in 2024-25 and broadly unchanged on a cumulative basis compared with the forecasts in the April World Economic Outlook (WEO),” the IMF said in its WEO-update July 2026.

The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle thanks to advances in artificial intelligence (AI) and its adoption, it said, adding the impact varied widely based on countries’ exposure to the war and position in the technology value chain.

Energy exporters outside the conflict zone benefit from favourable terms of trade, whereas economies plugged into the technology-led upturn experience stronger activity even if they are energy importers. In contrast, activity weakens for energy importers with limited participation in the technology value chain, a group that includes many low-income countries.

But despite Pakistan being one of the most affected nation in the US-Iran conflict and disruption of fuel supplies through the Straits of Hormuz, the IMF kept its growth rate forecast unchanged at 3.5pc for current year and 3.6pc for just concluded FY26, perhaps because of successful completion of third review of its $7bn extended fund facility in May and subsequent engagements in run off to the passage of federal budget last few days ago.

The IMF expected global headline inflation to increase from 4.1pc in 2025 to 4.7pc in 2026, then decline to 3.9pc in 2027. Slightly revised upward from April, these projections indicate that the disinflation trend in place since the beginning of 2024 has stalled.

The possibility of renewed Middle East conflict looms large and could extend commodity price volatility, further threaten supply chains, raise prices, and weigh on financial conditions.

Published in Dawn, July 9th, 2026