IMF increases growth forecast for Brazil and China, but reduces that for the world

The fund, however, improved its projections for Brazil in 2026 and 2027. It also began to see a slowdown in activity next year, according to a document released this Wednesday (8).

The update to the Global Economic Perspective report showed that the IMF now sees an expansion of 2.4% of Brazilian GDP (Gross Domestic Product) in 2026, above the 1.9% calculated in April. For next year, the estimate rose by 0.2 percentage points, to 2.2%.

The IMF's projection for this year is better than that of the Ministry of Finance, which predicted in May an expansion of 2.3%, and that of the Central Bank, of 2%. The Minister of Finance, Dario Durigan, had already announced last week that the IMF would readjust its projection for Brazil's economy.

As for global GDP, the fund predicts that growth should recover to 3.4% in 2027, still below the average of 3.5% observed in 2024 and 2025. The IMF also raised its inflation forecast to 4.7% this year and 3.9% in 2027, mainly because of the economic consequences of the war in Iran.

This Wednesday's projection is significantly higher than the April estimate, when the fund predicted inflation of 4.4% in 2026 and 3.7% in 2027. Before the start of the war in February, the IMF had predicted global inflation of 3.8% this year and 3.4% in 2027.

The report, finalized before US President Donald Trump declared the day before that the ceasefire with Iran was "over", states that although the global economy has weathered the conflict in the Middle East better than expected so far, the threat of new hostilities "hangs in the air".

"A re-escalation of geopolitical tensions would harm growth and worsen inflationary pressures," assesses the fund, which also highlights the possibility of new threats to food security if there are further disruptions in the fertilizer and energy markets.

Energy prices are 25% higher now than before the war began on February 28 and will remain higher, according to the IMF. The new forecast assumes that the Strait of Hormuz will return to pre-war conditions by March 2027.

"The disinflation trend that we had been observing since the beginning of 2024 has stalled," Petya Koeva Brooks, deputy director of the IMF's research department, told the Financial Times.

The IMF is more optimistic about the resilience of energy-exporting countries that are heavily integrated into the technology sector. Commodity importing nations, according to the fund, are not well positioned to benefit from AI advances and have had their growth forecasts revised downwards.

"A new conflict in the region will find the global economy in a worse situation than the first time," said Deniz Igan, head of the World Economic Studies division of the IMF's research department, adding that a simultaneous effort by many countries to rebuild their oil reserves could also trigger a rise in prices.

Global trade growth is also expected to slow in 2026, from 5% in 2025 to 3.5% this year. The drop is a reflection of a strong anticipation of purchases in 2025 due to the tariff policy of the President of the United States, Donald Trump. Trade should recover and grow again in 2027, reaching 4.3%.

The IMF urged policymakers to remain focused on price stability as they assess the effect of volatile commodity prices and growing demand for new AI technologies.

US FORECAST IS MAINTAINED, AND INCREASES IN CHINA

The IMF maintained its growth forecast for the US economy in 2026 at 2.3%, and raised the projection for 2027 by 0.1 percentage point compared to the April forecast, to 2.2%.

The growth forecast for the euro zone in 2026 fell from 1.1% in April to 0.9%, compared to 1.1% in April, while for 2027 the account was maintained at 1.2%. The European economy, as a significant importer of commodities, was particularly affected by the war, said Koeva Brooks.

For China, the forecast also rose to 4.6% in 2026, above the 4.4% predicted in April, and that expansion in 2027 will reach 4.1%, against 4% in April.

Oil-producing countries in the Middle East have been hit hardest by the war and are expected to face sharp contractions this year. Nations that consume the most energy are also facing a decline due to higher oil prices. Growth in India is expected to fall to 6.4% this year from 7.7% in 2025.

The outlook for Iran, however, has been modestly raised since April as American sanctions on its oil exports were temporarily relaxed. This week, however, the Trump administration revoked a 60-day license that allowed the sale of Iranian energy products after oil tankers were attacked while trying to pass through the Strait of Hormuz.

For Latin America and the Caribbean, the IMF now sees expansion of 2.4% in 2026 (an increase of 0.1 percentage point over the estimate in April) and 2.7% in 2027 (stable).

In the case of Emerging Market and Developing Economies, of which Brazil is a part, growth was estimated at 3.8% this year, a drop of 0.1 point, going to 4.5% next year, an increase of 0.3 point compared to April.

"The revisions are heterogeneous, reflecting differences in commodity dependence, geographic exposure, tourism remittances and receipts, sensitivity to financial conditions, and position in the global technology value chain," the IMF said.

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