IMF upgrades 2026 world economic growth forecast

The International Monetary Fund on Tuesday nudged its 2026 global growth forecast to 3.1 percent, up 0.1 percentage point from its July projection, as economies lifted by the artificial intelligence investment boom offset those hurt by the Middle East conflict. In its latest World Economic Outlook, titled "Resilience Under Strain, Urgent Choices," the IMF projected global growth slowing from 3.5 percent in 2025 to 3.1 percent in 2026, before recovering to 3.4 percent in 2027. The 2027 figure is unchanged from the July forecast and 0.2 percentage points higher than the April forecast. The fund described the world economy as neither simply slowing nor accelerating but having growth reallocated according to each country's exposure to the war-driven energy shock and to AI-related demand. The strongest performers combine limited energy vulnerability with deep ties to the AI hardware supply chain. The strong demand for AI has bolstered growth in China, India and other Asian countries, outpacing the overall growth in global trade, IMF chief economist Silvana Tenreyro said. Global trade would have grown at a far slower rate without the AI boost, she said. By contrast, energy importers with little connection to the technology cycle, including many low-income countries, face the hardest mix of higher import bills, weaker currencies and falling real incomes. The IMF's baseline assumes the Strait of Hormuz reopens in March, with conditions broadly returning to prewar levels by next October. Before the war, the strait carried about a quarter of the world's seaborne oil trade. The fund estimated that closing the strait would have cut global growth by 0.9 percentage points this year without offsetting supply responses. Rerouted Gulf output, higher production elsewhere, inventory drawdowns and a lower oil intensity of the world economy reduced the net hit to about 0.3 percentage points. The IMF warned that oil inventories are being depleted towards stress levels that could trigger sharp price jumps. Oil prices are assumed to average US$95.74 a barrel in 2026, up about 41 percent from 2025, and US$87.39 in 2027. Global headline inflation is now forecast to rise from 4.1 percent in 2025 to 4.7 percent in 2026, before easing back to 4.1 percent in 2027. GDP growth in the United States, the world's largest economy, is projected to remain steady at 2.3 percent in 2026 and 2027, supported by consumption, fiscal policy and technology investment. China, the world’s No. 2 economy, is expected to expand 4.5 percent this year, down from 5 percent in 2025, in line with the government's official target. Growth is then seen slowing to 4 percent in 2027, also one-tenth of a percentage point lower than previously forecast. "Higher global oil prices, together with protracted uncertainty and structural headwinds, are expected to weigh on activity," the IMF said, while noting that "policy support is expected to prevent a sharper slowdown". India is once again forecast to be the world’s fastest-growing major economy, advancing at a 7 percent clip, down from a sizzling 7.7 percent last year. Japan is forecast at 0.7 percent and Britain at 1.3 percent for 2026. The euro area is seen growing 1.1 percent this year and 1.2 percent next year, reflecting weak consumer confidence, among other things. The IMF said growth is becoming more concentrated. Just 32 economies now account for 95 percent of global growth, down from 54 in April. Roughly 47 percent of economies had their forecasts downgraded. (Agencies) Edited by Edmond Fong

2026-10-13 12:29:00