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Press Briefing Transcript: World Economic Outlook (WEO) Update, July 8, 2026
July 8, 2026
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IMF Communications Department
MEDIA RELATIONS
PRESS OFFICER: Jose De Haro
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Moderator: Mr. Jose Luis De Haro, Communications Officer, Communications Department
Panelists:
Ms. Petya Koeva Brooks, Deputy Director, Research Department
Ms. Deniz Igan, Division Chief, Research Department
* * * * *
Mr. DE HARO: Good morning, everyone, and welcome. I'm Jose Luis de Haro from the Communications Department, and we're gathered here today for the launch of the latest World Economic Outlook Update titled Global Economy in the Cross Currents of War and Technology.
I hope you all had a chance to access a copy of the report. If not, I will encourage you to visit IMF.org, where you can download the latest World Economic Outlook Update along with other materials that may be very useful for your reporting.
But before we begin, let me briefly explain what we mean by an update. For those who may be less familiar with the World Economic Outlook publication cycle, we publish two full editions each year, in April and in October, which include comprehensive country coverage and medium-term projections. In January and July, we publish an update which refreshes the outlook for a subset of economies rather than for the full membership. You will find the list of economies included in this update on page 14 of the report.
As always, today's update presents our latest global growth projections, assesses the risks surrounding our baseline, and outlines our key policy recommendations.
Let me also note that yesterday we announced the appointment of Silvana Tenreyro as the next IMF Economic Counselor and Director of the Research Department. We look forward to welcoming her to the Fund when she joins us on August 10th.
But in the meantime, to walk us through the latest World Economic Outlook Update, we are pleased to be joined by Petya Koeva Brooks, Deputy Director of the Research Department, and Deniz Igan, Division Chief, also with the Research Department. Petya will begin with some opening remarks summarizing the key messages of the Update, after which we'll be opening the floor to your questions.
Without further ado, Petya, the floor is yours.
Ms. BROOKS: Good morning, and thank you, Jose. Thank you all for joining us. The global outlook is being shaped by two powerful forces pulling in opposite directions: the lingering effects of the energy shock from the war in the Middle East and a technology-driven investment boom. Developments overnight illustrate the uncertainty and risks that surround the outlook. So far, the net effect of these forces varies significantly across countries depending on their exposure to the war and their position in the technology value chain.
We are projecting global growth of 3 percent in 2026 and 3.4 percent in 2027, broadly unchanged from April on a cumulative basis. In effect, we expect a V-shaped recovery, weaker growth this year relative to our pre-war forecast, followed by a rebound next year.
On inflation, the picture is somewhat less encouraging. Global headline inflation has been revised up to 4.7 percent this year, while our core inflation forecast is broadly unchanged. Put simply, the disinflation trend that has been in place since early 2024 has stalled.
Nevertheless, the world economy has weathered the shock from the war better than feared so far, with limited evidence of second-round effects. A larger spike in oil prices was avoided thanks to inventory drawdowns, expanded production outside the Gulf, and actions to help soften oil demand. And a steady rise in the renewable energy share, combined with lower energy intensity than just a few years ago, has also made many economies more resilient. And while financial conditions tightened sharply in April, they have since eased and remained supportive by historical standards.
Now our forecast assumes that the Strait of Hormuz begins reopening in mid-July, with conditions normalizing to the pre-war state by March of 2027. Commodity price assumptions are based on market pricing as of June 10th, which implied an average oil price of $89 a barrel for 2026. Though I'll note that the futures curve since shifted down a bit, although, of course, developments go in the other direction this morning. We also assume policy and geopolitical uncertainty remain elevated throughout 2027 and that the AI-driven technology cycle moderates from here with no exogenous boost to productivity.
Now turning to the risks to this outlook, they remain tilted to the downside, and there's a lot of uncertainty. A renewed escalation in the conflict could reignite commodity price volatility, tighten financial conditions, strain policy buffers, and worsen food insecurity in low-income countries. A market correction driven by a reassessment of AI profitability is another key downside risk. On the upside, faster AI adoption could lift growth, and a swifter than expected normalization of trade through the Strait of Hormuz would also be a positive surprise.
Now turning to policy recommendations, Central Banks should remain focused on price stability, though the appropriate response will vary by country depending on how commodity prices, the tech-driven demand, and inflation expectations interact. Now, many governments have deployed fiscal tools in response to the war, so far at limited cost. But as the shock fades, energy-related fiscal support should be unwound, and rebuilding fiscal space remains essential given elevated debt. Over the medium term, advancing structural reforms, including the energy transition, and addressing domestic imbalances will be critical to strengthen resilience and sustain balanced growth.
Now with that, let me stop here, and happy to take your questions.
Mr. DE HARO: So thank you very much, Petya. And before we open the floor, let me briefly go over a few ground rules.
If you would like to ask a question, please raise your virtual hand and wait until you are called upon. When called, please state your name and the media organization you represent. Please try to keep your questions concise so we can accommodate as many as possible. We have a limited time today. And today's briefing also its focus on the World Economic Outlook Update. So questions on country programs or institutional matters are outside the scope of today's event. And we will also limit questions to the countries that are covered in this specific World Economic Outlook Update.
We are going to begin now with questions on the global outlook only. And then we will be moving region by region and country-specific questions. So if you have global questions, please raise your hand, and I will call upon you.
QUESTIONER: Hi, good morning. Thank you so much for doing this. Nice to see you. You know, I'm still sort of hung up on the fact that things were so uncertain in April, and you had these scenarios. Now you've gone back to a baseline forecast. But as we saw just yesterday, situation escalated in the Gulf again. There was a lot of strikes. And, I just wonder, what is your litmus test for volatility and when you can make a baseline forecast and when you can't? And then specifically on this flare-up of tensions in the Gulf, what percentage assurance do you have that your forecast is correct? Like, what's the confidence scale or whatever you call that? The global economy seems like it's subjected to ever more uncertainty now. And I just wonder how you put that in the context of your forecast. Thank you.
Ms. BROOKS: Sure, okay. Absolutely. We are faced with a lot of uncertainty at the moment, and we did have also a lot of uncertainty back in April. So it's a very good question to ask.
I would say there are times when we see a completely new shock or something that we had not seen before. And I think in those circumstances, and we had the example of that in April of 2025 with the tariff announcements and then again, this year with the war. It was a type of shock that is, you know, it was very hard to make one baseline assumption and to pin down the underlying assumptions behind a baseline. Now four months into the war, I think we have a better sense about the channels through which the shock is materializing. And even though, and we do emphasize that in the report, there is still a lot of uncertainty, risks are still very much on the downside. And again, an escalation of the conflict is the key downside risk that we point to. We still think that we thought it was better to go back to the more traditional way of talking about a baseline and again emphasizing the risks around it.
Now in terms of the impact of escalation and if this risk were to materialize, then it would work through the channels that we had talked about before. Higher oil prices would -- commodity prices would raise inflation. They would also have the potential to unanchor inflation expectations. And then, of course, importantly, they could prompt a correction in financial conditions.
Mr. DE HARO: Okay, I see several hands that I want to assume that are global questions. Please come in.
QUESTIONER: Hi, good morning. Thank you so much for your time. Jorgelina do Rosario with Bloomberg. I just wanted to ask if you could develop a little bit more on the idea that risks are more balanced. As Andrea mentioned before, we see U.S. President Donald Trump saying that they're attacking on Iran again. So how these risks look more balanced today? Is it because you understand more on the channels of transmissions than you understood four months before or is there anything else explaining this more balanced risk? And also, you don't mention that much tariff risk. You do mention the risk of trade fragmentation, but you don't develop as much on trade and tariffs in this particular WEO. Is this because you don't see this as a major risk right now in the economy? Thank you so much.
Mr. DE HARO: I think we can answer this.
Ms. BROOKS: Yeah, we can address those questions. So first, let me again point out that in our report, the main statement you should take away on the risks is that risks are still very much on the downside. And the statement about being more balanced was just a comparison with April, where we felt they were even more elevated. But apart from again the channels of transmission and such, there is another aspect which I think I wanted to draw your attention to, which is that in our baseline, which was closed in terms of market assumptions as of June 10th. We already have oil prices, average oil prices assumed for this year at $89 per barrel, which was actually higher than what we had back in April in our reference forecast. So again, relative to that baseline, I think given developments we've seen so far, I think that is one aspect one should keep in mind.
And the second thing to point to is -- and this is the part that did surprise us relative to April -- was the importance and the strength of the technology cycle and the AI investment and the benefit that brought to a number of countries. So even though again, risks related to AI are, also, to your question on tariffs and possible fragmentation, we do consider that, of course, an important risk. But we also see a risk in the opposite direction. So, this is another case where it's a two-sided risk. We have seen a lot of new trade deals, bilateral and among groups of countries. And we do think that if we continue on that path, and there is an upside in terms of what that would mean for the global outlook.
QUESTIONER: Hi, thanks for holding this briefing in the morning. I was just wondering and wanted to follow up on the uncertainty that you flagged after the flare-ups overnight. Is there a sense of like, how long this sort of renewed conflict, how long would this go on for in order to sort of affect the recovery process that you're forecasting? And has the latest trend affected your expectations of how long the dispute from the disruptions from the Iran war are going to last? Because I think earlier in your opening remarks you mentioned that it appears we still expect conditions to normalize by early 2027. So, I'm wondering if you have a sense of how this might change if the conflict were to last and what kind of timeline we might be looking at, considering that things have not quite reached a steadier point.
Ms. BROOKS: Right. So again, what is embedded in our forecast is a gradual normalization of flows, as you pointed out, and then towards the -- which is basically going -- expected to take about three quarters. Now, if developments were to go in a different direction and if we were to see including through much higher oil prices, higher inflation expectations and less benign financial conditions, then I think the impact of those developments, including through supply chains, by the way, would take a toll on the global economy, again, with the impact being quite uneven across countries.
Now, I cannot speculate in terms of, you know, what the future path of the conflict is going to look like, but what I can say is that we're going to be monitoring developments very closely and we are going to be updating our assumptions if needed in our next forecasting round.
Mr. DE HARO: Perfect. Thank you, Petya.
QUESTIONER: Okay, so I have a question on your monetary policy. Given the renewed escalation of geopolitical tensions, given that major Central Banks around the world are currently revaluating, if not redoing their forward guidance as a monetary (policy) tool, I would like to know the Fund's take on this. What is your observation regarding the role and the effectiveness of forward guidance in the current high uncertainty environment? Thank you.
Mr. DE HARO: Okay, you can go ahead.
Ms. BROOKS: Yes. In a highly uncertain environment, I think Central Bank communications is key in terms of giving a sense of how Central Banks think about the shocks and their impact and on the monetary policy stance. Now, forward guidance has been a useful tool in the past, especially at the zero lower bound. But I think it's only natural as time goes by and as we learn more to kind of revisit the scope and again the modalities of forward guidance. So, we are definitely taking note and hope to engage on this issue in the coming months.
QUESTIONER: Hello, Jose. Thank you so much for taking my questions. Hello, Petya. I have a question on a global level, speaking of the high certainty you have spoken about now. And in the light of that, the report highlighted that the global economy is currently shaped by two opposing major forces, a negative supply shock from the war in the Middle East and a positive technology shock from the AI. So how are these crosscurrents unequally impacting the oil importers compared to the economies that are heavily integrated into the technology hardware value chain? Thank you.
Mr. DE HARO: Petya.
Ms. BROOKS: Thank you very much for this question. Indeed, these opposing forces are really playing out very differently across countries, and this is something that we emphasize in the report. While on one hand, the war shock is affecting most countries, I think the AI technology boom is really much more concentrated in a smaller group of countries. And in a way, the pattern that we see so far is that the oil exporters, who are generally the countries in the region that are most affected directly from the conflict, are the ones that we've had the biggest downward revisions.
Now there is also a group of countries that are energy importers, and they're not plugged in the AI investment chain. And here, a lot of low-income countries actually fall into that category. Their prospects are affected quite negatively. And we have, on average, if you compare the scarring that we've seen, we've definitely seen a lot here.
Now there is a third group, which is the countries that are part of that global technology investment value chain and countries like Korea and Thailand come to mind here. There, we've actually had upward revisions in our forecast. And last but not least, there are commodity exporters who were not directly affected by the conflict, and their prospects had also improved. So again, stepping back, a very large variation in the outlook.
Mr. DE HARO: Thank you, Petya. And we're going to start moving a little bit into regions and country-specific questions. I want to remind everyone that we also received some questions in advance through our Press Center.
And we're going to start with the MENA region. We have a question that goes as following: she wants to know a little bit about the growth outlook for GCC countries.
Then we will be moving to other countries in the region. So if you have questions about countries in the Middle East and the MENA region, please raise your hand, and I will give the floor right after we can start with that question. Deniz, maybe you can go ahead.
Ms. IGAN: Yeah, sure. So the pattern that Petya explained, the V-shaped recovery, so slowdown this year and a rebound next year, is actually most visible in the Middle East and Central Asia region, especially Middle East and North Africa, I should say here. We are forecasting growth to drop sharply from 3.7 percent in 2025 to 0.7 percent in 2026. And we are projecting a rebound of 6.5 percent in 2027. And compared to our April forecast, this is a downward revision of 1.2 percentage points for 2026 and an upward revision of 1.9 percentage points for 2027. And this is consistent, this downward revision this year and upward revision next year, is consistent with the longer closure of the Strait of Hormuz than we had assumed in April and the lower base effects going into next year.
But similar to the global picture, even within the region, we have quite a bit of variation. Countries like Iraq, Kuwait, Qatar, those are commodity producers most directly affected by disruptions to energy output and transportation. And they are projected to experience sharp contractions in their economy this year, followed by double-digit expansions next year. And we also have countries like Saudi Arabia, which is somewhat less affected because it's an economy with more diversified export routes. And the growth forecasts we have there are 1.7 percent for this year, and again a rebound of 5.5 percent next year.
And of course, the other country that we have in the region is Iran. And here we have an upward revision for this year actually and a downward revision next year. And the dynamics happening, the Iranian Outlook is related to the better outturn of oil exports we observed in March and April, and some relaxation of the restrictions on the country's exports, that's supporting growth this year, although we're still projecting contraction of 5.4 percent and smaller rebound next year because of the smaller contraction this year. Let me stop there.
Mr. DE HARO: Okay. We are going to continue in the MENA region.
QUESTIONER: Yes, hi. Thanks for taking my question. I wanted to check whether or not the Fund has updated figures for Lebanon and possibly any comments tied to the ongoing reform program in the country.
Mr. DE HARO: Thank you for your question. Unfortunately, Lebanon is not part of the World Economic Outlook Update. What I can do is I can reach out to you bilaterally and put you in touch with the press officer that covers Lebanon. Also, tomorrow, we have a press conference from our Director of Communications, Juli Kozack, and maybe that's a question that could be tackled in that press conference.
We are going to go back to the floor, and I just want to remind everyone we are just going to be able to answer questions of countries that are included in the Update. So, I will recommend you to take a look at the page 14 of the document.
QUESTIONER: Thank you, Jose. My first question is on the region. Could you please elaborate more on the intense drop of the region's growth before rebounding significantly going forward? And I have a question on Egypt. The IMF raised its projections for the Egyptian economy in 2026 and 2027. How do these figures differ from April projections of the WEO? And also, given Egypt is presented in the report on a fiscal year basis and categorized as a commodity [importer] in the broader region, how does the projected resilience align with the report's general outlook for commodity importers in the Middle East and North Africa? Thank you.
Mr. DE HARO: I think that the regional questions, maybe you can answer Deniz, and then we can go with Petya for Egypt.
Ms. IGAN: Yeah. So just to add some more details on what I had just described, I said we need to think in terms of different country groups within the region and the directly affected oil exporters. In those economies, the contraction we are projecting for this year, as well as the downward revisions relative to April, are reflecting longer disruptions in oil, gas, and refining production, as well as non-oil activity such as logistics, transport, and tourism. And trade rerouting capacity is providing some mitigation to that, but not for all oil exports in the region. For oil importers, revisions are much more modest and they are also a little bit heterogeneous and they reflect differences across countries in terms of the early 2026 resilience and reliance of these economies on oil exporters in the region. Let me stop there and turn to Petya.
Ms. BROOKS: Okay. And now going to Egypt, let me first mention the numbers. So this year, in 2026, we are expecting growth to be 4.6, which is an upward revision of 0.4. And then next year in 2027, we are expecting a slight deceleration to 4.4, which is a downward revision of 0.4. So part of that is happening precisely because of what you mentioned, the fiscal year basis. So, 2026 is really referring to the fiscal year '25-'26. And there we had stronger than expected growth in the third quarter, which offset the initial impact of the war. And that's why you have the upward revision. But then for 2026-27 is when we really see the impact of the war, where the impact of the war is visible. And that's why you have the downward revision. And this is due to weaker investment, higher financing costs, as well as the uncertainty that is weighing on activity.
Mr. DE HARO: Okay, so we're going to continue moving through regions, and I think that this is the perfect moment to go to Asia.
QUESTIONER: Thank you for doing -- I wanted to ask you about India. Am I audible?
Mr. DE HARO: Yes, we can hear you. It's cutting a little bit, but I hear that you want to ask about India.
QUESTIONER: What's your impression about India's growth trajectory and to what extent economy has been impacted by recent crisis in the Middle East, in particular the obstruction of flow of oil through the Strait of Hormuz?
Mr. DE HARO: Okay, so you cut a little bit, but I think that you are asking about the outlook for India given the current global economic situation. So, I think we can -- we can go ahead, Deniz.
Ms. IGAN: So for India, we have the forecast for this year revised down very slightly by 0.1 percentage point to 6.4. And growth for next year, for 2027 revised upward by 0.2 percentage point. And the factors that are underpinning the forecast revisions are basically twofold. On the upside, we have the better-than-expected outturn in the most recent data. But we also have high-frequency indicators through April showing quite a bit of resilience in overall economic activity. But these positive effects are then more than offset for 2026 by the higher energy prices we have in our baseline in the July Update, as well as the greater pass-through of those higher oil prices to prices at the pump in India. And moving into 2027, we are expecting [India’s growth]strengthening with the energy shock dissipating and medium-term growth being estimated at around 6.5 percent and output closing. We expect some pickup there.
Mr. DE HARO: Okay, so we're going to stay in Asia. I don't know if there's any other question on any country in the region. And I see hands up, but my site does not allow me to get all the names. But please come in. I think that we have a question on South Korea. Is that true? Because if not, we will be moving on. Okay.
QUESTIONER: Hi. Hi.
Mr. DE HARO: Yeah, here we are.
QUESTIONER: Yeah. South Korea has recorded unexpected growth driven by AI semiconductor investment. However, there are concerns within South Korea that this semiconductor cycle may be peaking now and could soon turn downward. How do you assess the sustainability of the current semiconductor cycle? And additionally, do you think Korean economy could face significant shocks when this cycle eventually enters a downturn?
Mr. DE HARO: Let's go with South Korea. And then I have a question on China from the Press Center.
Ms. IGAN: Okay, so on Korea, as you said, we -- actually, Korea is one of the countries that has seen a large upward revision in the July update. So we are projecting for this year a 2.6 percent growth. This is a 0.7 percentage point upward revision. And also, we are projecting a 2.5 percent [for 2027], still very robust rate of growth, which is again another upward revision, this time for 0.4 percentage point. The main drivers for that is the very strong activity that we have seen in the first quarter, Q1. And that was driven, as you pointed out, driven by the very impressive growth in AI hardware exports.
Now going forward, we do not expect a downturn per se. We do anticipate some moderation, hence growth from 2.6 percent this year to slightly moderating to 2.5 percent [next year]. Having said that, we discussed in the report not only for Korea but more generally globally, potential risks from a correction in the AI space in technology driven investment cycle experiencing a downturn. And Korea would, as uniquely as it has been placed to benefit from the upturn, it would also be standing to be at risk in the case of a downturn there.
Let me stop.
Mr. DE HARO: So thank you, Deniz. And we have a question that we received through our Press Center on China, and she's asking about the drivers behind the new outlook for China.
Ms. IGAN: Okay. So for China, what we have is actually another upgrade. For 2026, we expect the Chinese economy to grow at a rate of 4.6 percent. This is an upward revision from the 4.4 percent we were projecting in April. And there are two factors shaping this updated projection. And on the upside, again, the outturn for the first quarter has been higher than what we were expecting back in April at 5 percent year-on-year growth. And that automatically raises the growth we're projecting for the year as a whole. But on the downside, we are now assuming, compared to April, we are assuming higher global oil prices and thus expectations to weigh on growth due to the direct impact that oil prices and gas prices have on the Chinese economy, as well as lower demand from trading partners. So, the net effect turns out to be positive for this year since the impact is partially offset with the positive Q1 GDP outturn.
Mr. DE HARO: Okay, time to continue moving on. This is -- it seems like we're in the World Cup and we're going around the world. So now we are going to be moving to Africa. So, I think that we have a couple of questions on the region.
QUESTIONER: Okay. Thank you very much for taking my question. My question is, given what we are seeing, and your latest report, and the situation from yesterday, the announcements, the attack on Iran, how do the latest changes affect Africa economics? And the other question is, given the AI that you mentioned in your report and the immigration crisis that we are seeing in South Africa, what impact do global immigration policy have on African economic and labor markets? Thank you.
Mr. DE HARO: And before we go to answer those questions, we have [another reporter] that has been very patiently waiting online. So please come in and ask your question.
QUESTIONER: Thank you very much. I just want to maybe add onto her story point because the report notes that even though Sub-Saharan countries are largely absent from the AI-driven global technology upswing, they face headwinds from the decline in official development assistance, just on the AI-driven global technology upswing, and African countries being absent from that. In terms of a regional perspective of Sub-Saharan Africa, I do wonder whether you assess the consequences of that and what that will mean in terms of the risks. You also note on page seven, the last line of the first paragraph that AI hype and exuberant financial markets could at the same time sow the seeds of micro financial instability. What does that mean? Please?
Mr. DE HARO: Okay. I think Deniz, these are all for you.
Ms. IGAN: Yeah. So let me start, maybe with the broader outlook, how Sub-Saharan Africa is faring within this picture. So let me start by noting that we actually had seen a broad-based pickup in growth in 2025 in the region. We had an acceleration of growth to 4.5 percent. Now the war obviously has clouded outlook for 2026, and we are now projecting a softening of growth to 4.3 percent in the region as a whole. And this is beyond the cost of energy for the region. What matters is also the increase in fertilizer prices that we have seen, and this is coinciding with planting season in some countries. And it may hurt the agricultural sector in addition to all the other impacts of energy prices and agricultural sector accounts for a large share for some Sub-Saharan economies. Again, the overall picture, the softening, relatively small softening to 4.3 percent, is masking substantial divergence across countries. And this reflects primarily the differences in policy space, how reform implementation has been going even before the shock has arrived, but also how exposed the different economies have been both to the war, but also to the technology chain. Basically, what we're seeing is that the oil-importing, non-resource-intensive economies are more adversely affected with the higher energy and food prices, while some larger economies in the region are continuing to benefit from earlier stabilization and reform efforts, although they are outside AI-related or the technology value chains. And they do face headwinds from reduction in official development assistance.
Just to give you a sense what the two largest economies in the region, Nigeria is expected to grow at 4.1 percent, quite stable. And this is supported by improved macroeconomic stability and favorable terms of trade with Nigeria being an oil exporter. At the same time, higher prices, so there's some offset to that positive terms of trade effect, because higher prices for essentials are expected to aggravate poverty and food insecurity. Growth in South Africa is also expected to remain stable at 1.1 percent and continue to improve on the back of strengthened policy frameworks and ongoing structural reforms. When we look outside of these countries, growth in the rest of the region is expected to slow markedly from 5.6 percent in 2025 to 5.2 percent this year and next.
In terms of AI, I think what is important to recognize is countries, in order to benefit, there is the preconditions, how well they were already integrated into the technology chains, but going forward, how well they can position themselves in terms of adopting AI. And we have done several analyses there. And one thing to note is while Sub-Saharan Africa is poised to benefit from some of the adoption of AI, there's need for more investment in infrastructure, in skills upgrading, in order to re-up the benefits for even more.
Let me stop there.
Mr. DE HARO: Okay, time to continue moving around the world. And from Africa we go to Europe. We have received a couple of questions online, so I'm just going to try to group them. They're going to be touching on the UK, Italy, Spain.
Yeah, so basically on Spain and Italy, can you tell us about the new outlook for Spain? Then we have a bunch of questions on Italy's outlook, too. And then we have another question on the UK about the outlook for the UK and how high tax rates if they are having an impact in UK growth.
So let's start, if you want, with Italy, then we move to Spain, then we finish with the UK. And if there's any question online regarding Europe or a European country, please raise your hand or then we will be moving on to the Western Hemisphere. I don't see any hands. So let's start with Italy.
Ms. BROOKS: All right. Italy, the forecast is unchanged since April as indicators have held up broadly at the levels that we expected, although at a weak level. So we're expecting growth of 0.5 this year and 0.5 next year. The resilience and recovery plan investment continues to support activity. At the same time, higher energy and food prices and elevated uncertainty weighing on private consumption. Now investment has been revised up due to the higher reliance on imported energy and is expected to remain above target through 2028. Now the risks to this outlook are downside to growth on the downside to growth and upside to inflation.
Now turning to Spain, this is another country where, actually, our forecast is unchanged. We are projecting growth to slow down from 2.8 last year to 2.1 this year and then further to 1.8 in 2027. We did observe stronger than expected outturns in the first quarter and some the energy support measures that were implemented that offset the negative impact of the higher energy prices. So again, because of these two offsetting effects, the forecast is unchanged.
Just to note here that the high share of renewables has also played a role in Spain's resilience. And again, we expect domestic demand to keep supporting growth even as net exports weaken, as the household savings rate is still quite high and is expected to come down. As in Italy, the risks to this outlook are on the downside.
And then finally turning to the UK. For the UK, we actually have an upward revision to the forecast for this year. We're expecting growth to be at 1.0, upward revision of 0.2, and we also expecting it to pick up to 1.3 next year. Now again, the slowdown in growth relative to last year is due to the higher energy prices, the tighter financial conditions, and of course the uncertainty that is weighing on private spending. And the upward revision very much reflects the stronger momentum that we saw in the run up to the war. And then, when it comes to the fiscal situation, just to note that we think that the current fiscal strategy continues to strike a good balance between deficit reduction and growth-friendly spending, including the front-loading of infrastructure investment, which is in the plans.
And let me stop here.
Mr. DE HARO: Okay, so we are getting to the end of this trip. Now we move to the Western Hemisphere.
QUESTIONER: Yes, sure. Jose, thank you so much. Can you elaborate a bit more about Argentina's outlook, please? Thank you so much.
Mr. DE HARO: And before we answer, first of all, congratulations on yesterday's match. And then we have a couple of other questions very similar to what was asked, a little bit more about what is behind of Argentina projections and especially their resilience that is going on in the country with respect to the Middle East conflict.
Ms. BROOKS: Sure. So the forecast for Argentina has broadly unchanged since April and since the completion of the Article IV and the Second Review of the program. So, we're talking about growth of 3.5 percent this year and 4 percent next year. And what I can say here is that real activity expanded by 0.7 quarter on quarter in the first quarter. But since then, the growth momentum is expected to pick up for the remainder of the year. And part of that is due to the primary exports and the recovery in investment and construction.
Now another element of the outlook which is important is that disinflation has resumed and is expected to proceed gradually, reaching-- inflation is expected to reach 25 percent by the end of 2026. And here, the tight fiscal policy and the continued enhancements to the monetary framework and operations are expected to support inflation converging to single digits by late 2028. And again, the higher energy prices have contributed to a temporary rise in inflation. But going forward, the lower oil prices that are expected could also support the disinflation process.
Mr. DE HARO: Okay, before we close, we have a couple of questions, both on the outlook for Brazil and the outlook for Mexico.
Ms. BROOKS: Sure. Let's start with Brazil, where we have upgraded our forecast, and we're expecting by 0.5 this year, a pretty sizable upward revision to 2.4. And also, for 2027, we've also upgraded our forecast to 2.2, and we've seen this because of a strong harvest that contributed to the upward surprise in the first quarter. And of course, the oil exporting status that Brazil has, the greater fiscal support, policy support and robust private consumption explained these upward revisions. That said, risks to the outlook are on the downside.
And then on Mexico, we have downward revisions for this year and next. We're expecting growth at 1.2 in 2026 and 1.9 in 2027. We saw -- even that for 2026, that represents stronger activity relative to last year. Now again, these downward revisions are because of the weaker-than-expected first quarter and the prospects for a more protracted USMCA review. And as in the other cases, I think the risks here are on the downside.
Mr. DE HARO: Okay, we are getting to the end. Please come in if you have a follow-up question, and we will end up with you because we are over time.
QUESTIONER: Okay, thank you so much for coming back to me. I just wanted to ask you about the inflation expectations. So, you say there is little evidence of inflation expectations deanchoring, but that does indicate that there's some evidence of that. And I wondered if you could tell us what you're going to be looking for? We've had three quarters of increases in headline inflation. You know, when we get to four or five quarters, does that, you know, do you then start to get more worried? What -- how to assess that situation with the inflation expectations? Thank you.
Ms. BROOKS: Indeed, what happens with inflation expectations is a critical part of what would then play a role in establishing what is the right monetary policy stance. Now, again, the good news so far has been that at the global level, these expectations have remained, I would say, fairly well anchored. Of course, I don't want to generalize to say that this is the case in all cases. We do have examples in which we have seen a drift up in inflation expectations. But what we will be looking at is not only the market-based expectations in the near term, in the medium term, and in the long run.
Of course, what is most worrisome is when you see those expectations drifting up at the medium and long run, which would make it even -- would make it more difficult for central banks to bring inflation back to target. But beyond the market expectations, it's also important to look at household expectations, at expectations of firms. And with the availability of more data and newer tools, I think we're better able to do that now than in the past. So, it's certainly an area that we'll be watching very closely.
Mr. DE HARO: And on that note, first of all, I want to thank Petya and Deniz for their time. Also, remind you all that if you want to access the World Economic Outlook Update along with supporting materials, you should go to IMF.org.
Another reminder: tomorrow, Thursday, July 9th, our Director of Communications, Julie Kozack, will hold her regular IMF press briefing. And we look forward to seeing many of you there.
And on behalf of the Research and Communications Departments, thank you for joining us today. If you have any follow-up questions, please don't hesitate to contact us at media@imf.org.
Thank you and have a great rest of your day.
