The International Monetary Fund on Monday nudged up its global growth forecasts for 2026, saying strong investment in artificial intelligence and easing trade tensions are helping offset lingering headwinds from geopolitical risks and policy uncertainty.
In an update to its World Economic Outlook, the IMF said it now expects the global economy to expand by 3.3 percent in 2026, up 0.2 percentage point from its previous forecast published in October. The Fund also raised its estimate for 2025 growth to 3.3 percent, a 0.1 percentage point increase from its earlier projection, citing stronger-than-expected momentum in several major economies.
Growth in 2027 is forecast at 3.2 percent unchanged from the prior estimate, suggesting a gradual stabilisation of global economic activity after years of shocks linked to the pandemic, inflation surges and trade disruptions.
The IMF said the upward revisions reflect improved global financial conditions and resilience among businesses and households, as well as adjustments to U.S. trade policy. Tariff rates imposed by the United States peaked in April 2025 but have since been partially rolled back following new trade agreements, easing pressure on global supply chains.
“Trade-related uncertainty has moderated somewhat, allowing investment and consumption to recover,” the IMF said, while cautioning that trade policy remains a key source of downside risk.
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A major driver of the improved outlook is the rapid expansion of investment in artificial intelligence, particularly in advanced economies. The IMF said rising capital spending on AI-related infrastructure, data centres and software has boosted asset prices, supported corporate profits and raised expectations of future productivity gains.
The United States was among the biggest beneficiaries of these trends. The IMF upgraded its U.S. growth forecast, citing strong private investment in AI, fiscal incentives such as tax credits, and lower effective tariff rates following recent trade adjustments. The Fund said these factors have helped sustain economic momentum even as higher interest rates continue to weigh on some sectors.
China’s outlook remains mixed, the IMF said, with steady export performance and targeted policy support partly offset by ongoing weakness in the property sector and subdued domestic demand. Growth in emerging markets and developing economies is expected to remain uneven, reflecting differences in access to financing, reform momentum and exposure to global trade.
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Despite the improved headline figures, the IMF warned that risks to the outlook remain firmly tilted to the downside. Renewed trade tensions, particularly involving major economies, could disrupt supply chains and dampen investment. The Fund also flagged the risk of a sharp correction in financial markets, especially if expectations around AI-driven productivity gains fail to materialise.
“Asset valuations in some sectors appear stretched,” the IMF said, noting that a sudden reassessment of AI-related earnings prospects could trigger broader market volatility with spillovers to the real economy.
Geopolitical tensions, including conflicts that could affect energy prices or trade routes, also remain a concern. The IMF said further shocks could complicate efforts by central banks to manage inflation while supporting growth.
Inflation is expected to continue easing globally, allowing most central banks to gradually loosen monetary policy over the forecast period. However, the IMF cautioned that progress could be uneven, particularly in economies facing currency pressures or persistent fiscal imbalances.
The Fund reiterated calls for policymakers to rebuild fiscal buffers, pursue structural reforms to raise productivity and strengthen international cooperation on trade and financial stability. It said harnessing the benefits of AI while managing associated risks will be a key challenge for governments in the coming years.
While the IMF’s latest projections point to a period of steady, if unspectacular, global growth, it stressed that the outlook remains highly sensitive to policy choices and investor confidence, warning that complacency could quickly undermine the fragile gains achieved so far.
