The International Monetary Fund upgraded its global economic growth forecast for the current year to 3.1 per cent, a slight increase from the previous projection of three per cent in July. However, the IMF warns of escalating risks stemming from mounting debt levels, particularly in light of the financial fervor surrounding artificial intelligence.
According to the latest Economic Outlook report released during the fall meetings of the IMF and World Bank in Bangkok, the global economy is anticipated to expand by 3.1 per cent in 2026, slightly lower than the 3.5 per cent growth registered in 2025. The United States is projected to sustain a steady growth rate of 2.3 per cent in both 2026 and 2027.
The report highlights that advanced economies collectively are expected to grow by 2.1 per cent this year, a rise from two per cent in 2025, but growth is anticipated to slow down to 1.9 per cent next year. The forecasts are based on an approximate 41 per cent surge in oil prices, averaging $96 US per barrel this year. Global inflation is predicted to reach 4.7 per cent in 2026, with an expected decline to 4.1 per cent next year.
The projections hinge on the assumption that oil and gas shipments through the Strait of Hormuz will resume by March and that the increasing demand for AI will stabilize. Although artificial intelligence is offsetting the impact of soaring oil and gas prices, it introduces its own set of risks, as per IMF economists.
The uneven impacts of AI are evident, with the U.S. and China accounting for over three-quarters of net demand for AI-related equipment. The report suggests that global growth is becoming more concentrated, with 32 countries contributing to 95 per cent of the global growth, as opposed to 54 countries in April.
Furthermore, AI-related stock market corrections pose a significant risk, alongside escalating bond yields and cyber threats affecting financial systems. Concerns over AI’s effects on employment, described as a gradual but substantial upheaval, were expressed by IMF officials.
IMF’s managing director emphasized the critical importance of countries enhancing their national finances and addressing escalating debt levels, especially amidst high borrowing costs. Economies less affected by energy shocks and benefiting from AI adoption are better positioned to maintain growth, while developing economies vulnerable to oil and gas price hikes may experience a growth slowdown.
In the Middle East and Central Asia, economic contractions are expected this year, with a projected recovery to a 6.3 per cent growth rate by 2027. The eurozone countries are forecasted to exhibit modest growth, with a 1.1 per cent expansion in 2026 and 1.2 per cent in 2027.
China, the second-largest economy globally, is anticipated to grow by 4.5 per cent in 2026, aligning with the government’s official target. India is projected to remain the fastest-growing major economy, with a growth rate of seven per cent, slightly lower than the previous year.
The International Monetary Fund, a global lending institution aimed at fostering economic growth and financial stability, convened with finance ministers and central bank governors in Bangkok to evaluate the global economic landscape and strategize for sustained growth and financial stability.