The International Monetary Fund has lowered its global growth forecast, and geopolitical risks are increasing market uncertainty.

Global Growth Prospects Weaken, Geopolitical Risks Rise

Washington – In an update to its World Economic Outlook released on April 14, 2026, the International Monetary Fund (IMF) downgraded its global growth forecast for this year to 3.1% from 3.4% in 2025. The report noted that global economic growth is on a "fragile but stable" trajectory, but the outlook remains highly uncertain. The update was released on the eve of the IMF and World Bank Spring Meetings, held in Washington, D.C., from April 13 to 18.

In a report titled "The Global Economy Under the Shadow of War," the IMF presented a "reference forecast" based on the assumption of a limited and short-lived Middle East conflict, with disruptions fading by mid-2026. However, the report also envisions scenarios of prolonged or expanded conflict.

The economic impact varies across regions, with emerging economies and those neighboring the conflict facing the most severe slowdowns, while advanced economies are expected to see more moderate but still sluggish growth.

Resilience of Major US Banks Highlighted

Despite the challenging macro outlook, first-quarter earnings from major US banks showed resilience in the financial sector. Goldman Sachs posted its best quarterly results in five years; Bank of America saw profits boosted by higher trading revenue; Morgan Stanley's equity traders also benefited from the broader Wall Street rally. Bloomberg called it a "windfall" for Wall Street's major banks.

Analysts noted that supportive fiscal policies and a weaker dollar provided a tailwind for corporate earnings, with S&P 500 companies expected to post 12.6% earnings growth for the full year. Meanwhile, merger and acquisition activity has rebounded, with deal structures becoming more diversified and increasingly driven by artificial intelligence (AI).

Global Financial Stability Risks Cannot Be Ignored

The Financial Stability Board (FSB) warned that the Middle East conflict is causing significant global financial instability, with increased market volatility and tighter financial conditions. The FSB specifically highlighted vulnerabilities such as overvalued assets, high leverage in the non-bank sector, and liquidity mismatches, which could impact sovereign bond markets, private credit, and broader financial stability if conditions deteriorate.

Meanwhile, hedge funds made net purchases of $86 billion in stocks over five trading days, one of the fastest paces on record. The head of the European Banking Authority stated that European banks can withstand the current shocks but need to prepare for emerging risks such as AI-driven cyber threats.

UK banks have begun to lower fixed mortgage rates, with market conditions stabilizing after the volatility triggered by the Middle East conflict. South Korea's financial markets are attracting foreign capital back, but exchange rate volatility and geopolitical risks remain concerns.

AI Risks and Infrastructure Bottlenecks

Institutions such as the Bank for International Settlements warned that the latest AI models from big tech companies could pose serious cybersecurity risks to the global banking system, exposing weaknesses in banks' defenses. Additionally, nearly 40% of US data center projects face risks of delay due to permitting hurdles, labor shortages, and grid strain, which could hamper the deployment of AI infrastructure.

World Economic Forum PerspectiveMatthew Blake, Managing Director of the World Economic Forum, pointed out that global finance is undergoing a structural transformation, and geopolitical fragmentation is replacing the post-Cold War era of open capital flows. Trade barriers, sanctions, and regional blocs are reshaping cross-border capital flows, increasing complexity and risk for banks and investors.