IMF warns geopolitical tensions and war risks are reshaping global growth outlook
The International Monetary Fund has warned that rising geopolitical tensions, expanding military spending and growing fragmentation in global trade are reshaping the trajectory of the world economy, with countries increasingly forced to balance security priorities against fiscal stability and long-term growth.
In its April 2026 World Economic Outlook titled Global Economy in the Shadow of War, the IMF said the world economy remains resilient but faces mounting pressure from wars, geopolitical fragmentation, supply chain vulnerabilities and weakening productivity growth.
The Fund projected global growth at 2.7 percent in 2026, down from the post-pandemic rebound levels recorded in recent years, while warning that medium-term growth prospects remain subdued across both advanced and emerging economies.
According to the report, advanced economies are expected to expand by 1.6 percent in 2026, while emerging market and developing economies are projected to grow by 3.4 percent.
The IMF said rising uncertainty surrounding trade, industrial policy and geopolitical conflicts is weighing on investment decisions and disrupting global production networks.
“Geoeconomic fragmentation and escalating trade restrictions are increasingly shaping global economic outcomes,” the report noted.
China’s economy is projected to slow to 4.4 percent growth in 2026 amid weaker external demand and structural challenges, while the United States is forecast to grow by 2.3 percent. The euro area is expected to record subdued growth of 1.1 percent.
Sub-Saharan Africa is projected to grow by 4.3 percent in 2026, supported by stronger domestic demand and easing inflation in several economies.
Ghana is expected to expand by 4.8 percent in 2026 after posting estimated growth of 6 percent in 2025. Inflation in Ghana is projected to slow sharply to 5.8 percent in 2026 from 14.2 percent in 2025, while the current account surplus is forecast at 10.1 percent of GDP.
Nigeria is projected to grow by 4.1 percent in 2026 with inflation easing to 16 percent, while South Africa’s economy is forecast to expand by just 1 percent.
The IMF warned that higher defense spending is becoming a major fiscal challenge globally as governments divert resources toward military preparedness in response to rising security risks.
According to the report, about half of the world’s countries increased military spending over the past five years, while arms sales by the world’s largest defense companies have doubled in real terms over two decades.
The Fund noted that defense spending booms typically raise fiscal deficits by about 2.6 percentage points of GDP and increase public debt by roughly 7 percentage points within three years.
“While defense buildups can stimulate economic activity in the short term, they also create medium-term fiscal pressures and can crowd out social spending,” the IMF said.
The report added that countries increasing military expenditure may also experience worsening external balances because much of the additional demand is directed toward imported military equipment and technology.
The IMF urged governments to preserve fiscal sustainability, maintain macroeconomic stability and pursue structural reforms aimed at boosting productivity, strengthening resilience and supporting long-term growth amid an increasingly fragmented global economy.
