The International Monetary Fund (IMF) says that the war in the Middle East has forced a reassessment of its economic outlook for Africa in 2026 and into 2027.
Speaking at a press briefing at the launch of its World Economic Outlook: Global Economy in the Shadow of War report on Tuesday in Washington DC at the ongoing IMF/World Bank Spring Meetings, Deniz Igan, division chief of the IMF’s research department, said:
“Now, with the war, we have reduced global growth and softened prices for non‑oil commodities and also worsened terms of trade for oil importers, and that is an important aspect for variation within the region, as well. And on top of that, the region is also facing significant challenges from headwinds from declining foreign aid, which on – the bilateral aid cuts range from 16 to 28% in 2025, and we project that trend to continue.”
“We have a downgrade on growth by 0.4 percentage points cumulatively for 2026 and 2027 and at the same time median inflation in Sub-Saharan Africa is projected to go up from 3.4% in 2025 to 5% in 2026.”
The impact of the conflict has tempered the cautious optimism that closed out 2025, a year in which African economies proved resilient despite trade disruption and policy uncertainties.
The resilience, the IMF noted, was supported by lower than expected US tariffs, selective fiscal support, benign financial conditions, and a booming technology sector. That momentum had been expected to carry into 2026, with analysts preparing to revise global growth forecasts upward.
That trajectory has now been derailed. The outbreak of the US-Israel war with Iran, coupled with the closure of the Strait of Hormuz and extensive damage to regional energy infrastructure, has triggered the most severe energy shock since 2022. Oil and gas prices have surged, dragging up the cost of diesel, jet fuel, fertiliser, aluminium, and helium.
The IMF warns that the scale and duration of the conflict and continuing disruption will determine the depth of the global slowdown and further impact on Africa.
Where are the shocks coming from?
The IMF identified the shocks as coming from three primary channels: a negative supply shock, as higher commodity prices raise production costs, disrupt supply chains, and erode household purchasing power; amplified inflation pressures, as firms and workers attempt to recoup real income losses, heightening the risk of wage-price spirals in economies where inflation expectations remain fragile; and tighter financial conditions, driven by falling asset valuations, rising risk premiums, capital flight, and a strengthening US dollar.
Assuming a short-lived conflict, the IMF projects a moderate 19% rise in energy prices this year. But even under this relatively contained scenario, global growth is expected to fall to 3.1%, with headline inflation rising to 4.4%.
Assuming a more adverse scenario which the IMF says could be characterised by deeper supply disruptions and rising inflation expectations, growth is projected to drop to 2.5%, while inflation climbs to 5.4%.
In a severe scenario, one in which energy shortages persist into 2027, the IMF projects that it would push global growth down to 2% for two consecutive years, with inflation exceeding 6%.
Low income African energy importers face the greatest strain, particularly those already burdened by high debt and limited fiscal buffers. But the most acute economic damage is expected in the Gulf, where the conflict’s physical and financial impacts are concentrated.
Crisis could accelerate long-term shifts
While the immediate priority is stabilising energy markets and restoring passage through the Strait of Hormuz, the IMF believes the crisis could accelerate structural transitions like faster adoption of renewable energy that would strengthen resilience to future shocks. Advances in artificial intelligence offer long-term productivity gains though with uneven labour market effects.
The conflict however underscores the fragility and opportunities inherent in the emerging global order. As Pierre-Olivier Gourinchas, economic counsellor and director at the IMF’s research repartment put it in his closing remarks:
“Growing strains on international order are pushing toward a multipolar world. But a more multipolar world need not be a more fragmented one.”
“Countries are finding new trade partners and forming trade agreements beyond traditional geopolitical lines…with the right policies including a swift cessation of hostilities and reopening of the strait of Hormuz, the damage can remain limited.”