Bangkok: The International Monetary Fund has raised its forecast for global economic growth in 2026, but warned that the world economy remains vulnerable to conflict in the Middle East, high energy prices, rising government debt and uncertainty surrounding the artificial intelligence boom.
In its latest World Economic Outlook, released on Tuesday, the IMF projected that the global economy would grow by 3.1 per cent in 2026, up from its July forecast of 3 per cent. Growth is expected to reach 3.4 per cent in 2027.
Despite the slight improvement, the outlook remains uncertain. Investment in artificial intelligence infrastructure is helping to support economic activity, but geopolitical tensions, inflation and financial market risks continue to threaten the global economy.
The IMF expects global inflation to reach 4.7 per cent in 2026 before easing to 4.1 per cent in 2027. Higher energy costs and continuing economic uncertainty are likely to remain important concerns for governments, businesses and households.
The global economy is projected to grow more slowly than in 2025, when growth reached an estimated 3.5 per cent. The latest forecast also highlights differences between economies benefiting from technology investment and those facing pressure from expensive energy and borrowing costs.
Artificial intelligence investment has become an important source of support for global growth. Companies are spending heavily on data centres, computing equipment, semiconductors and other infrastructure needed to develop and operate advanced AI systems.
This investment is increasing demand for technology products and supporting economic activity in several countries. However, the benefits are unevenly distributed. The United States and China account for a large share of demand for imported computer chips and other equipment used in AI infrastructure, while countries supplying technology components are also benefiting from the expansion.
The investment boom nevertheless carries risks. Companies are spending large amounts of money in anticipation of future productivity improvements and profits. If those benefits fail to meet expectations, businesses could reduce their investment and financial markets could experience a sharp correction.
Such a downturn could affect economies far beyond the technology sector. Falling asset prices and weaker business confidence could reduce household spending, employment and investment, placing additional pressure on global growth.
The IMF has also warned about the continuing impact of conflict in the Middle East. Disruptions to energy supplies and shipping routes can increase oil and gas prices, raising the cost of transport, electricity and production. Countries that depend heavily on imported energy are particularly exposed to these pressures.
Higher fuel prices can also increase the cost of food and other goods because manufacturing and distribution become more expensive. This could place additional pressure on household budgets, particularly in countries where families already face high living costs.
The IMF's baseline forecast assumes that oil and gas shipments through the Strait of Hormuz will resume in March 2027, with a broader return to prewar shipping conditions expected by October 2027. These dates are assumptions used in the economic projections and are not confirmed dates for the restoration of normal shipping.
The fund expects oil prices to average 96 dollars per barrel in 2026 and 87 dollars in 2027. However, a more severe scenario in which oil prices rise to 130 dollars per barrel through the first quarter of 2027 could weaken economic growth and push inflation higher.
Under this hypothetical scenario, global growth could be reduced by 0.2 percentage points in 2026 and 0.5 percentage points in 2027. Global inflation in 2027 could rise to 5.2 per cent. These figures represent a possible outcome if conditions worsen, rather than the IMF's central forecast.
Rising government debt and borrowing costs are another major concern. Governments that spend more on interest payments have less money available for public services, infrastructure and measures to protect households from economic shocks.
Higher government bond yields could add to these pressures, particularly in countries already facing substantial debt burdens. The IMF has cautioned that financial markets could become more vulnerable if borrowing costs rise further or investors lose confidence in the expected returns from AI investment.
The fund has also identified cyber incidents as a potential threat to financial institutions and market confidence. Although financial markets have shown resilience, the IMF has warned that this should not be taken as a guarantee against future disruption.
The outlook varies considerably between major economies. India is projected to grow by 7 per cent in 2026, making it the fastest growing major economy in the forecast. The United States is expected to expand by 2.3 per cent, while China's economy is projected to grow by 4.5 per cent.
The euro area is forecast to grow by 1.1 per cent in 2026. Developing and emerging economies collectively are expected to expand by 3.7 per cent, down from 4.5 per cent in 2025.
The IMF also expects its combined Middle East and Central Asia regional grouping to contract in 2026 before recording growth of 6.3 per cent in 2027. The projected recovery reflects the possibility of improved conditions following the severe economic shock, although the outlook remains uncertain. The figures apply to the combined regional grouping and do not mean that every country will experience the same pattern.
These differences show that stronger global growth figures do not necessarily translate into similar improvements for all countries. Economies with strong domestic demand and growing technology sectors may be better positioned to withstand external shocks than countries heavily dependent on imported fuel or expensive borrowing.
The impact of artificial intelligence on employment is also an important concern. The IMF has warned that the technology could affect around 40 per cent of jobs worldwide by changing the tasks workers perform, altering job requirements or eliminating some positions. This does not mean that 40 per cent of jobs will disappear. The actual effects will depend on how businesses adopt the technology and how workers and governments respond to changes in the labour market.
Despite these risks, the IMF's latest projections indicate that the global economy is continuing to grow. The modest improvement in the 2026 forecast offers some reassurance, but the fund's warnings underline the uncertainty surrounding the outlook.
The balance between technology investment, energy security, public debt and financial stability will remain important in determining whether the world economy can sustain growth in the coming years.
Tighten repetition and shorten the articleClarify the baseline and hypothetical forecasts