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The International Monetary Fund (IMF) has slightly upgraded its outlook for the global economy, forecasting 3.3 per cent growth in 2026, driven largely by a surge in artificial intelligence (AI) investment even as trade tensions, geopolitical conflicts, and supply-chain disruptions continue to pose risks.
In its latest World Economic Outlook update, the IMF raised its 2026 growth projection by 0.2 percentage points from October, matching its estimate for 2025, which was also revised up marginally.
IMF chief economist Pierre-Olivier Gourinchas said the global economy has shown unexpected resilience in the face of U.S. tariffs, wars, and economic uncertainty. He noted that businesses have adapted by rerouting supply chains, while some trade agreements have eased duties, allowing trade to stabilise.
The Fund now assumes an effective U.S. tariff rate of 18.5 per cent, down from around 25 per cent in earlier estimates, reflecting a partial easing of trade pressures.
The IMF upgraded its U.S. growth forecast for 2026 to 2.4 per cent, citing massive investment in AI infrastructure, including data centres, advanced chips, and power grids.
However, it trimmed the U.S. outlook for 2027 slightly to 2.0 per cent. The AI boom is also lifting growth in parts of Europe, with Spain’s 2026 forecast raised to 2.3 per cent, while Britain’s projection remained unchanged at 1.3 per cent.
Despite the growth boost from AI, the IMF warned that the technology could also fuel inflation if investment continues at a breakneck pace. It cautioned that if promised productivity gains fail to materialise, a sharp correction in tech-driven financial markets could hit consumer spending and investment.
The Fund also flagged renewed trade flare-ups, geopolitical tensions, and supply-chain disruptions as key downside risks to the global outlook.
On China, the IMF raised its 2026 growth forecast to 4.5 per cent, helped by lower U.S. tariffs and a shift of Chinese exports toward Southeast Asia and Europe, though this remains below its stronger-than-expected 5 per cent performance in 2025.
For the euro zone, the Fund lifted its 2026 projection to 1.3 per cent, citing higher public spending in Germany and better performance in Spain and Ireland. Japan received a slight upgrade due to fiscal stimulus, while Brazil saw its forecast cut to 1.6 per cent as tighter monetary policy weighs on growth.
The IMF said global inflation is expected to ease from 4.1 per cent in 2025 to 3.8 per cent in 2026 and 3.4 per cent in 2027, giving central banks more room to cut interest rates and support economic activity.
Gourinchas stressed that while risks remain, the global economy has proven more resilient than expected and continues to adapt to a more fragmented and volatile world.
In its latest World Economic Outlook update, the IMF raised its 2026 growth projection by 0.2 percentage points from October, matching its estimate for 2025, which was also revised up marginally.
IMF chief economist Pierre-Olivier Gourinchas said the global economy has shown unexpected resilience in the face of U.S. tariffs, wars, and economic uncertainty. He noted that businesses have adapted by rerouting supply chains, while some trade agreements have eased duties, allowing trade to stabilise.
The Fund now assumes an effective U.S. tariff rate of 18.5 per cent, down from around 25 per cent in earlier estimates, reflecting a partial easing of trade pressures.
The IMF upgraded its U.S. growth forecast for 2026 to 2.4 per cent, citing massive investment in AI infrastructure, including data centres, advanced chips, and power grids.
However, it trimmed the U.S. outlook for 2027 slightly to 2.0 per cent. The AI boom is also lifting growth in parts of Europe, with Spain’s 2026 forecast raised to 2.3 per cent, while Britain’s projection remained unchanged at 1.3 per cent.
Despite the growth boost from AI, the IMF warned that the technology could also fuel inflation if investment continues at a breakneck pace. It cautioned that if promised productivity gains fail to materialise, a sharp correction in tech-driven financial markets could hit consumer spending and investment.
The Fund also flagged renewed trade flare-ups, geopolitical tensions, and supply-chain disruptions as key downside risks to the global outlook.
On China, the IMF raised its 2026 growth forecast to 4.5 per cent, helped by lower U.S. tariffs and a shift of Chinese exports toward Southeast Asia and Europe, though this remains below its stronger-than-expected 5 per cent performance in 2025.
For the euro zone, the Fund lifted its 2026 projection to 1.3 per cent, citing higher public spending in Germany and better performance in Spain and Ireland. Japan received a slight upgrade due to fiscal stimulus, while Brazil saw its forecast cut to 1.6 per cent as tighter monetary policy weighs on growth.
The IMF said global inflation is expected to ease from 4.1 per cent in 2025 to 3.8 per cent in 2026 and 3.4 per cent in 2027, giving central banks more room to cut interest rates and support economic activity.
Gourinchas stressed that while risks remain, the global economy has proven more resilient than expected and continues to adapt to a more fragmented and volatile world.
