IMF says AI investment propping up global growth, but war and debt threaten outlook
IMF upgrades global growth forecast to 3.1% for 2026 Strong investment in AI is major reason for better outlook US economy forecast to grow 2.3% this year and in 2027 Forecasts for China's growth tick down to 4.5% for 2026 and 4.0% for 2027 Gulf countries, including Saudi Arabia, see GDP forecasts downgraded sharply By David Lawder BANGKOK, Oct 13 (Reuters) — The global economy will still manage to top 3% real GDP growth this year as strong AI investment offsets the energy shock from the war in the Middle East, but downside risks are mounting and more countries are being left behind and vulnerable to rising debt loads, the International Monetary Fund said on Tuesday. Despite a more protracted conflict that has kept oil prices above $100 a barrel, the IMF is forecasting 2026 global growth at 3.1%, a slight uptick from the 3.0% it predicted in July. The World Economic Outlook forecast, released as global economic and finance leaders gather in Bangkok for the IMF and World Bank annual meetings, is about even with the most optimistic scenario issued in April but below 2025 global growth of 3.5%. For 2027, the IMF predicts 3.4% global growth, flat with the July forecast and up 0.2 perce
0% for 2027 Gulf countries, including Saudi Arabia, see GDP forecasts downgraded sharply By David Lawder BANGKOK, Oct 13 (Reuters) — The global economy will still manage to top 3% real GDP growth this year as strong AI investment offsets the energy shock from the war in the Middle East, but downside risks are mounting and more countries are being left behind and vulnerable to rising debt loads, the International Monetary Fund said on Tuesday. 0% it predicted in July. 5%. 2 percentage point from April.
The slight improvement is largely due to continued strong investment in artificial intelligence infrastructure, prompting growth upgrades for key advanced economies building AI platforms and especially for countries supplying AI hardware, including South Korea, Malaysia, Mexico and Thailand, which is hosting the meetings this week. "The global economy has been resilient, but that resilience is under strain, with risks to growth tilted to the downside," the IMF's new chief economist, Silvana Tenreyro, told reporters. "A prolonged conflict in the Middle East could put additional pressures on inflation and slow down growth.
A worsening of fiscal prospects, a reassessment of AI profitability, and extreme weather events could further weaken the outlook," she added. Countries and companies moved quickly to mitigate the oil price shock, drawing down reserves, substituting other suppliers and energy sources and cutting oil demand, Petya Koeva Brooks, the IMF's deputy research director, told Reuters in an interview. 5% this year without these measures, but their effect is fading as the war drags on. The IMF noted a growing divergence between countries benefiting from AI and those bypassed by it.
Just 32 countries now account for 95% of global growth, compared to 54 countries in April. Downward growth revisions have become more widespread, with the IMF downgrading 47% of economies since the April forecasts were issued, including several energy importers outside AI value chains. 7% growth predicted in July. 9%, respectively.
1 percentage point higher for next year. The US economy is expected to be supported by robust private consumption, tax cuts and AI investment, though the boost from AI will be offset by its large import content. 9% in July due to stronger investment in AI, participation in AI value chains such as chemical production in Germany, and higher defense spending in EU countries. 3% due to larger AI investment.
1 percentage point from July, as higher oil prices exacerbate weak domestic demand despite strong exports. 3 percentage point next year compared with the July forecasts amid robust domestic demand, services activity and AI investment. 1% for 2027. Energy Price, Ai Risks Participants at the IMF and World Bank meetings in Bangkok will be assessing a precarious outlook.
The IMF forecasts are based on assumptions that the Strait of Hormuz will reopen in March 2027 with a broad return to pre-war shipping conditions occurring by October 2027. The IMF assumes an average oil price of $96 per barrel for 2026 and $87 in 2027. 5 percentage point in 2027. 2%.
AI is also a huge source of uncertainty, with major downside and upside risks, the IMF report said. 6% by 2029, with the bulk of the benefits going to the US and China. 4% by 2028. This shift would also trigger a sharp reduction in asset prices and tighter financial conditions that cause a major drop in consumption, particularly in the US, the IMF said.
8% drop in US output. The IMF also warned that elevated public debt levels, particularly in advanced economies, increase the risk of sharply higher borrowing costs that can weigh on growth prospects. It urged governments to stop delaying action to rebuild fiscal buffers and articulate credible medium-term plans to bring debt back to sustainable levels — advice that IMF officials plan to push at the Bangkok meetings. com; +1 202 843 6288;)