Twice a year, the release of the IMF World Economic Outlook serves as a vital pulse check for the global economy. This April, the International Monetary Fund has released an edition titled “Global Economy in the Shadow of War.” This heavy, evocative title reflects a reality that is on everyone’s mind: how escalating geopolitical conflicts, particularly in the Middle East, are shaping our economic future.

In our recent podcast episode, the Flywheel Economics team sat down to unpack this report. We moved beyond the headlines to examine the sober truth: while the global economy is holding up, it is doing so only barely. Growth remains stable but underwhelming, sitting in the mid-2% range. We are essentially witnessing a story of resilience masking profound underlying fragility.

Three Forces Defining 2026

First, geopolitical conflict itself. The war in the Middle East disrupts energy supplies in ways that ripple across the world. When roughly 20% of global oil passes through contested waters, any disruption becomes everyone’s problem. That is why a conflict thousands of miles away affects your gas bill. Second, energy and commodity volatility connected to that conflict. Third, the fragmentation of global trade and supply chains, these are no longer side stories but core macroeconomic drivers.

The Trade-Off: Guns vs. Butter

A critical theme in this IMF World Economic Outlook is the “defence boom.” As governments increase spending on personnel and equipment, they face a classic economic trade-off. Because much of this spending is financed through debt rather than increased taxation, we are essentially choosing “jam today” at the expense of “jam tomorrow”. By prioritising short-term security, nations risk diverting funds from essential long-term investments like health, education, and the green energy transition.

A Glimmer of Hope

Yet the report is not entirely dark. AI and technology investment emerge as a counterbalance. While geopolitical instability threatens growth, productivity gains from artificial intelligence offer a counterweight. The question is whether that counterforce will prove strong enough to sustain global growth despite external shocks.

Even in fragility, the IMF World Economic Outlook offers some paths forward. Ukraine’s economic recovery, still ongoing despite active conflict, teaches a hard lesson: recovery requires macroeconomic stability, institutional rebuilding, and deliberate international support. It is not automatic.

Perhaps most importantly, the report argues that renewable energy is not merely climate policy. It is a security imperative. Countries overly dependent on contested oil supplies face perpetual vulnerability. Moving toward renewables reduces exposure to distant conflicts and supply disruptions. Yet governments, pressed by immediate security concerns, may delay that transition just when acceleration matters most.

The IMF World Economic Outlook reminds us that the global economy is not resilient because it is strong. It is resilient despite fragility. That distinction matters as we navigate what comes next. Listen to the full episode and share your thoughts with us on LinkedIn, Instagram, and X (formerly Twitter).