AI, tech investment keep global economy on track, says IMF

The global economy is set to grow at a steady 3.3% in 2026 and 3.2% in 2027, as a powerful surge in artificial intelligence (AI) investment continues to counterbalance trade uncertainty, geopolitical tensions, and uneven regional momentum, the International Monetary Fund (IMF) said in its World Economic Outlook update released Monday.

The IMF slightly raised its 2026 growth forecast by 0.2 percentage point from its October outlook, citing resilient private-sector adaptation, accommodative financial conditions, and heavy capital spending on AI infrastructure, particularly in the United States and parts of Asia. Global growth for 2025 is now estimated at 3.3%, matching the outlook for next year.

Trade uncertainty

Headline inflation is projected to ease further, falling from 4.1% in 2025 to 3.8% in 2026 and 3.4% in 2027, helped by cooling demand and lower energy prices. Inflation is expected to return to target more slowly in the United States than in other major economies.

Behind the stable headline figures, however, the IMF warns of increasingly divergent forces shaping the outlook. Trade tensions have softened since late 2025, aided by a temporary US-China truce that reduced tariffs and paused export controls on key technologies. Still, policy uncertainty remains elevated, and country-specific tariff shifts continue to reshape supply chains and investment decisions.

Economic momentum varies widely. US growth accelerated sharply in 2025, driven by technology spending that added an estimated 0.3 percentage point to annualized GDP growth, while parts of Europe lagged amid weak manufacturing and energy-related headwinds. China’s growth slowed as housing demand remained subdued, even as exports proved resilient. Japan contracted in the third quarter of 2025, though fiscal stimulus is expected to support a modest recovery.

Economic outlook

Looking ahead, the IMF projects advanced economies to grow by 1.8% in 2026, with the US expanding by 2.4% and the euro area by 1.3%. Emerging and developing economies are expected to grow just above 4%, led by India and supported by stabilization in parts of Africa and the Middle East.

Risks remain tilted to the downside. A sharp correction in technology markets, renewed trade conflicts, or geopolitical shocks could disrupt growth and tighten financial conditions. At the same time, the IMF sees significant upside if AI adoption translates into sustained productivity gains, potentially lifting global growth by up to 0.3 percentage point in 2026.

To preserve stability, the Fund urged governments to rebuild fiscal buffers, safeguard central bank independence, reduce policy uncertainty, and accelerate structural reforms that broaden the sources of growth beyond a narrow set of high-tech sectors.

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Nathaniel Alexander Abaño

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