IMF cuts global growth forecast assuming Strait of Hormuz opens mid-July, but Trump ends ceasefire

📌 Summary:

• IMF's quarterly World Economic Outlook update cut the 2026 global growth forecast by 10 bps to 3%, on the assumption that the Strait of Hormuz begins reopening mid-July and conditions return broadly to prewar state by March 2027 — even as Trump tore up the ceasefire with Iran

• India: FY 2026-27 growth projection trimmed 10 bps to 6.4% (below RBI's 6.6% forecast); FY 2027-28 raised 20 bps to 6.7%; calendar 2026 growth seen at 7% — India remains among the fastest-growing major economies, supported by private consumption and services

• Other economies: China raised 20 bps to 4.6% (2026); Saudi Arabia cut sharply to 1.7% (from 3.1%); Iraq, Kuwait, Qatar to contract sharply in 2026; Iran's economy to shrink 5.4%

• "Most imminent risk" is the Middle East: renewed conflict would propagate via higher commodity prices, volatility, supply shortages and exchange-rate pressures; oil inventories nearing multi-year lows

• India's crude basket had surged 66% to $114.48/barrel in April; cooled to $68.62 in July — but renewed hostilities sank Indian equity indices over 2%

• Global inflation forecast raised: consumer prices to rise 4.7% in 2026 (vs 4.4% earlier); energy prices ~25% above prewar levels

• War shock partly offset by the AI-driven global technology cycle — global growth slowing only modestly from 3.5% in 2024-25

🎯 UPSC Relevance: GS3 Economy — growth forecasts, external shocks and India's macro resilience; energy-price transmission to inflation

📝 Prelims Facts:

• IMF World Economic Outlook: 2026 global growth 3%; India FY27 6.4%; RBI forecast 6.6%
• India crude basket: $114.48/barrel (April) → $68.62 (July)
• Global CPI forecast 2026: 4.7%

🔑 Key Term: World Economic Outlook (WEO) — IMF's flagship survey of global growth projections, published twice yearly with quarterly updates