Low-income, indebted oil-importing countries face the sharpest energy shock. The International Monetary Fund is urging governments to limit subsidies and rebuild fiscal buffers. On Tuesday, October 13, the IMF said global growth would reach 3.1% in 2026, though countries would share the gains and costs unevenly.
Who Gains From the Growth
The IMF lifted its 2026 global growth forecast to 3.1%, up from 3.0% in July. The world economy grew at an annual pace of 3.5% in 2025. The forecast partly depends on artificial-intelligence investment offsetting harm from higher oil and gas prices. The IMF expects growth to slow in 2027.
That investment is concentrated in a few countries. The United States and China accounted for more than three-quarters of net demand for imports of computer chips and other AI-related equipment, the report said. Silvana Tenreyro, the IMF's director of research, told reporters in Bangkok, “The outlook is highly uneven.” The report said growth was increasingly concentrated: 32 countries accounted for 95% of global growth, compared with 54 countries in April.
The United States is forecast to grow 2.3% in both 2026 and 2027. China, the world's No. 2 economy, is forecast to grow 4.5% in 2026, down from 5% in 2025 and in line with the government's official target. India is forecast to grow 7%, down from 7.7% in 2025, making it the fastest-growing major economy. Nikkei Asia reported that growth in India and major Southeast Asian countries was faster than previously expected that year, helped by AI and worldwide high-tech investment.
Who Pays for the Shock
The IMF expects oil prices to rise nearly 41% in 2026, averaging $96 a barrel. It forecasts global inflation of 4.7%, up from 4.1% in 2025. Its forecast assumes oil and gas shipments through the Strait of Hormuz will resume by March and that AI demand will moderate.
Developing economies and emerging markets more vulnerable to higher energy costs are forecast to grow 3.7% in 2026, down from 4.5% in 2025, before recovering to 4.4% in 2027. The IMF said low-income developing countries that are net oil importers and aren't exposed to the AI investment boom faced the greatest vulnerability to shocks from the Iran war.
Debt has climbed after years of shocks. “Unfortunately, after years of the global economy being hit by shock after shock, debt levels have increased quite a lot, and at the same time, inflation has become a problem,” Petya Koeva Brooks, deputy director of the IMF Research Department, told AFP. She said vulnerable countries faced harder choices because household consumption is heavily weighted toward energy and food. “But unfortunately there is no other choice.”
Debt, Jobs and the IMF Prescription
The IMF urged governments to offer narrow, targeted subsidies while rebuilding fiscal buffers and addressing rising debt. Koeva Brooks said many low-income countries faced debt distress or came close to it, and should seek debt restructuring if they couldn't address the problem. “Where debt is not sustainable, then resolving that debt and having orderly and timely restructuring is always better than waiting,” she said, adding that delaying would make restructuring much more costly.
The IMF also warned that a slowdown in AI investment could cut output in advanced economies and, through trade links, in Asia. In its worst-case scenario, if AI failed to deliver promised productivity gains, global GDP forecasts for 2028 would fall by as much as 0.4%. IMF Managing Director Kristalina Georgieva described AI's employment effects as “a slow moving tsunami, but tsunami nonetheless.” She estimated that around 40% of jobs globally could be augmented, downgraded or eliminated over time, and said some effects were already visible.
Climate risks are adding pressure to food prices. Koeva Brooks said the IMF had included some effects of a particularly intense El Niño in higher prices for certain food items. “We have a significant increase in beverage prices, in the prices of rice, and so on,” she said. The IMF said rising debt and high borrowing costs posed growing risks to global financial stability. Finance ministers and central bank governors meeting in Bangkok were to assess the economy and discuss financial stability and sustained growth.