The International Monetary Fund raised its 2026 global growth forecast to 3.1% on Tuesday, up from 3.0% in July. But it expects growth to slow in 2027, and says a technology investment boom is the main thing keeping the world economy together. The world economy grew at an annual pace of 3.5% in 2025.
The IMF released its outlook in Bangkok, where economic and financial leaders have gathered for the fall meetings of the IMF and World Bank.
An Economy Propped Up by One Bet
The fund's report credits artificial-intelligence investment with offsetting some damage from sharply higher oil and gas prices. That's a heavy load for one sector to carry. The IMF expects oil prices to climb nearly 41% in 2026, reaching an average of $96 a barrel, while global inflation rises to 4.7% from 4.1% in 2025.
Two assumptions underpin the forecasts: oil and gas shipments through the Strait of Hormuz resume by March, and AI demand moderates. Neither is guaranteed.
The gains are lopsided. 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. Growth is also concentrating in fewer countries. Thirty-two countries now account for 95% of global growth, compared with 54 countries in April.
"The outlook is highly uneven," Silvana Tenreyro, the IMF's director of research, told reporters in Bangkok. The report put it more bluntly: "The global economy is not simply slowing or accelerating; rather, growth is being reallocated across countries according to their exposure to the war-induced supply shock and AI-related demand strength."
The Numbers by Region
Advanced economies are forecast to grow 2.1% in 2026, up from 2.0% in 2025, before slowing to 1.9% in 2027. The United States is expected to grow 2.3% in both 2026 and 2027. The 21 countries sharing the euro are forecast to grow just 1.1% in 2026 and 1.2% in 2027.
China, the world's No. 2 economy, is projected to grow 4.5% in 2026, down from 5% in 2025 and in line with the government's official target. India, at 7%, is the fastest-growing major economy, though that's below 7.7% in 2025. Nikkei Asia reported that growth in India and major Southeast Asian countries is running faster than previously expected, helped by AI and worldwide high-tech investment.
Developing and emerging economies more exposed 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 Middle East and Central Asia are expected to contract in 2026, then grow 6.3% in 2027.
Debt Leaves Little Room to Maneuver
The sharpest warnings came on debt. After years of shocks, governments have less cushion than they used to. "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.
The fund urged governments to offer narrow, targeted subsidies while rebuilding fiscal buffers and addressing rising debt after years of shocks since the pandemic. Koeva Brooks said many low-income countries face debt distress or are close to it. If they can't fix the problem, she said, they should seek restructuring. "Where debt is not sustainable, then resolving that debt and having orderly and timely restructuring is always better than waiting, because then the cost of restructuring down the road is going to be much higher," she said.
The hardest choices fall on the most exposed. "For those countries that are most vulnerable, this is where the consumption basket is heavily weighted towards energy and food, and so indeed it is much much more difficult," Koeva Brooks said. "But unfortunately there is no other choice."
The IMF said low-income oil importers with no stake in the AI investment boom are most vulnerable to shocks from the Iran war. Last week, the fund also said rising debt poses a growing risk to global financial stability, particularly amid high borrowing costs, and urged rich and poor countries alike to improve their national finances.
What Happens If the AI Bet Stalls
Koeva Brooks was direct about the downside. If AI investment slowed, the world economy "would see a negative impact on output, not only in advanced countries like the U.S. but again through trade linkages also in Asia." In the IMF's worst-case scenario, where AI fails 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 effect on jobs on Monday as "a slow moving tsunami, but tsunami nonetheless." She said the fund estimates the impact over time at around 40% of jobs globally, either augmented, downgraded or eliminated. "And we are already seeing some of this impact," she said.
Climate-linked food costs add to the pressure. Koeva Brooks said some effects of a particularly intense El Niño are already reflected in higher prices for certain foods. "We have a significant increase in beverage prices, in the prices of rice, and so on," she said. "Of course, it could turn out that the domino effect is even bigger than what we currently have."
Why This Matters:
The headline number looks steady, but the foundation is narrow. A global economy relying on one investment theme—and on the assumption that Hormuz shipping reopens by March—has little margin for error. The IMF's advice points to old fundamentals: targeted rather than blanket subsidies, rebuilt fiscal buffers, and early debt restructuring before costs balloon. For heavily indebted governments, borrowing through another shock is getting harder as rates stay high. Capital and growth are concentrating in 32 countries, suggesting investors reward economies that attract private investment and punish those weighed down by debt and energy dependence. If the AI boom cools, the cushion disappears, and the countries least able to absorb a hit would feel it first.