Al-Shal: Current events accelerate the shift of economic weight from the West to the East
The “Shal” report stated that the International Monetary Fund (IMF) did not materially change its forecasts for global economic performance in its July report compared to its April forecast. It projects global economic growth for the current year, 2026, to reach 3.0%, down from 3.5% in 2025 and from 3.1% in its previous April report. The IMF also anticipates growth in advanced economies of approximately 1.7% for the current year, a slight decrease from the 1.8% projected in the April report. This is because the group’s largest economy, that of the United States, is expected to maintain its projected growth rate of 2.3% in both reports, which is higher than the growth rates of its peers in the advanced economies group. The weakness in the group’s growth rates is attributed to the sluggish growth expected in the Eurozone, where the economy’s growth for the current year is estimated at around 0.9%, down from 1.4% in 2025 and from 1.1% in the April report.
In detail, the Fund estimates China’s economic growth at approximately 4.6%, down from 5.0% in 2025, but up from 4.4% in the April estimates, indicating that it has absorbed some of the shock from geopolitical events and rising energy prices. The highest projected growth rate for a major economy belongs to India, with an estimated growth of around 6.4% for the current year, although this remains lower than the 7.7% achieved in 2025. This is due to India’s reliance on approximately 50% of its energy needs from supplies passing through the Strait of Hormuz, and it does not appear to have sufficient strategic reserves to buy time to partially neutralize the impact of reduced imports from that route.
Comparative economic growth rates between advanced economies in the West and those in Asia, specifically China and India, confirm that geopolitical events, the regional war, and the closure of the strait may have slightly accelerated the shift of economic weight from the West to the East. The figures still suggest that China’s economy, the world’s second-largest, will continue to grow at approximately twice the rate of the US economy, the world’s largest. Meanwhile, India’s economy, the world’s fifth-largest, is expected to grow at a rate approximately 9.1 times that of Germany’s economy, the world’s third-largest, which is projected to grow by around 0.7% in 2026, and about 6.7 times the growth expectations for Germany in 2027.
The Fund’s report typically does not include projected growth rates for Gulf Cooperation Council (GCC) countries in its July edition, but it makes an exception for Saudi Arabia, likely because it is among the world’s top 20 economies. The Fund projects Saudi Arabia’s growth in 2026 to reach 1.7%, down from 4.6% in 2025 and from the 3.1% rate in the April report. However, it expects the Saudi economy to grow by approximately 5.5% in 2027. It is worth noting that the margin of error in these estimates is significant, whether between reports or regarding future growth projections. For instance, the Fund bases its forecasts on the anticipated opening of the strait in the middle of the current month and the resumption of traffic through it to pre-war levels by March 2027.
