The International Monetary Fund on Tuesday trimmed its projection for growth in emerging market and developing economies in 2026 to 3.9% from the 4.2% forecast it published in January. The lender said higher energy and food costs coupled with uncertainty tied to the war in the Middle East are expected to weigh most heavily on the more vulnerable, commodity-importing nations.
In its World Economic Outlook update, the IMF noted that the downgrade it applied to developing economies is sharper than the revision for advanced economies, highlighting the greater exposure many of these countries have to oil price shocks, currency volatility and swings in investor sentiment.
The IMF said the economic impact of the conflict will differ substantially across countries depending on a range of factors - including geographical proximity to the fighting, the strength of trade and financial linkages with the region, reliance on remittance flows and dependence on energy imports.
"The current hostilities in the Middle East pose immediate policy trade-offs: between fighting inflation and preserving growth and between supporting those affected by the rising cost of living and rebuilding fiscal buffers," the IMF said in the update.
The global lender identified the most at-risk group as commodity-importing emerging economies that already have structural or financial weaknesses. For these countries, the IMF said, higher import bills, weaker currencies and reduced capital inflows could combine to push up inflation and intensify financing pressures.
However, the IMF stressed that its baseline outlook rests on a relatively benign scenario: the reference forecast assumes the conflict remains contained and is relatively short-lived, with disruptions beginning to ease by the middle of 2026. The fund warned that if the war expands or keeps oil and gas prices elevated for longer, losses for emerging economies would be substantially larger.
Regional and country-level divergences
Aggregated emerging-market figures conceal sharp regional differences, the IMF said. Emerging and developing Asia is still projected to lead major developing regions in growth, but even there the pace is expected to moderate - from 5.5% in 2025 to 4.9% in 2026, and then to 4.8% in 2027.
China's 2026 growth forecast was trimmed to 4.4%, a 0.1 percentage point reduction relative to the January projection. The IMF noted that lower U.S. tariff rates and stimulus measures help offset some of the adverse effects from the Middle East conflict for China.
India stood out as an exception, with its 2026 growth projection nudged up by 0.1 percentage point to 6.5%. The IMF attributed the upward revision to tariff relief and carryover momentum from 2025, which it said more than offset the effects of pricier energy.
Heaviest near the conflict - Middle East and Central Asia
Unsurprisingly, the IMF found the largest economic consequences are concentrated among countries closest to the fighting. For Middle East and Central Asia as a group, the fund cut its 2026 forecast by 2.0 percentage points to 1.9%, one of the largest regional downward revisions in the report. Under the IMF's baseline, that regional growth is projected to rebound to 4.6% in 2027.
For the narrower Middle East and North Africa grouping, the 2026 forecast was reduced by 2.8 percentage points to 1.1%. Saudi Arabia's 2026 outlook was lowered by 1.4 points to 3.1%.
At the country level, Iran experienced one of the steepest revisions: the IMF cut its 2026 growth forecast by 7.2 percentage points to -6.1%. Egypt - identified as a commodity importer - is expected to see growth slow to 4.2% in 2026.
Other regions
Sub-Saharan Africa's growth is projected to ease modestly from 4.5% in 2025 to 4.3% in 2026. Still, the IMF warned that oil importers in the region that lack strong resource cushions will face greater strain from higher energy costs.
In Latin America and the Caribbean, the IMF revised its 2026 growth estimate up by 0.1 percentage point to 2.3%. The report said exporters such as Brazil benefit in part from higher oil prices, which provide some relief to domestic finances.
Policy implications and outlook
The IMF highlighted that policymakers face immediate trade-offs in the wake of the conflict-driven economic shifts - balancing efforts to contain inflation against measures to support growth, and weighing short-term assistance for those hit by rising living costs against the need to rebuild fiscal buffers. How each country navigates those trade-offs will depend on its exposure to the conflict and the state of its external and fiscal positions, the fund said.