IMF raises 2026 growth forecast as AI offsets war shock

The International Monetary Fund nudged up its forecast for global growth this year. It said a surge in artificial intelligence investment is offsetting the energy shock from the Middle East war, but warned that the world economy's ability to absorb further shocks is wearing thin.cnbc+1

In its World Economic Outlook, released in Bangkok ahead of the IMF and World Bank annual meetings, the fund projected global growth of 3.1% in 2026. That is up from the 3.0% it forecast in July and below last year's 3.5%. It kept its 2027 forecast at 3.4%. "The global economy has been resilient, but that resilience is under strain, with risks to growth tilted to the downside," Silvana Tenreyro, the IMF's new chief economist, told reporters. In a blog post she wrote: "Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience".investing+2

Uneven gains

The fund said AI spending gave the economy a "demand impulse." That boost led to upgrades for countries that supply AI hardware, including South Korea, Malaysia, Mexico and Thailand. Just 32 economies now account for 95% of global growth, down from 54 in April. The IMF expects U.S. growth of 2.3% in both 2026 and 2027. It raised its euro zone forecast for this year to 1.1% and trimmed China's to 4.5%. India's forecast is 7.0% for both years. Gulf economies took the deepest cuts. The IMF now expects Saudi Arabia's economy to shrink 3.3% this year, and Iraq, Kuwait and Qatar face contractions of roughly 16%.cnbc+1

"Growth is being reallocated across countries according to their exposure to the war-induced supply shock and AI-related demand strength," the fund said.cnbc

Mounting risks

Petya Koeva Brooks, the IMF's deputy research director, told Reuters that without steps such as drawing down reserves and switching suppliers, global growth would have fallen to 2.5% this year. She added that the effect of those measures is fading. Global oil stocks are being drawn down by about 2.7 million barrels a day, which raises the risk of sharp price moves. The forecasts assume the Strait of Hormuz reopens in March 2027 and that oil averages $96 a barrel this year.axios+2

The IMF expects global inflation of 4.7% this year and 4.1% in 2027, with the 2027 figure revised up from July. Its models put the chance that global inflation tops 5% next year at about 35%. In a scenario where the war worsens and oil reaches $130, inflation in 2027 would rise to 5.2%.investing+1

The fund also warned that a reassessment of AI profitability could trigger a 20% fall in U.S. stocks. In that case, global output would end up 1.1% below baseline by 2028, and U.S. output 1.8% lower. Public debt in advanced economies is projected to reach 115% of GDP by 2031, up from 108% in 2025. The IMF called rebuilding fiscal buffers "increasingly urgent".cnbc+1