IMF says AI investment propping up global growth, but war and debt threaten outlook
The International Monetary Fund said Tuesday that the global economy will still manage more than 3% real GDP growth this year as strong investment in AI 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 IMF’s 2026 global growth prediction is 3.1%, a tiny increase from the 3.0% it forecasted in July despite a longer-lasting conflict that has maintained oil prices above $100 a barrel.
The World Economic Outlook forecast, announced as global economic and financial leaders convene in Bangkok for the annual meetings of the IMF and World Bank, is about in line with the most optimistic scenario issued in April but below 2025 global growth of 3.5%.
The IMF projects global growth of 3.4% in 2027, unchanged from July’s prediction and up 0.2 percentage point from April.
The small improvement is primarily from ongoing large investments into artificial intelligence infrastructure and an upgrade in growth projections for the big advanced economies that are creating AI platforms and particularly for nations that provide AI hardware such as South Korea, Malaysia, Mexico and Thailand, which is hosting the meetings this week. “The global economy has shown resilience, but that resilience is being tested, with risks to growth skewed to the downside, the IMF’s new head economist Silvana Tenreyro told reporters.A long and drawn-out war in the Middle East might add to inflationary pressures and dampen economy. Further erosion of the expectation might come from a deterioration in fiscal prospects, a re-evaluation of AI profitability and extreme weather events, she added.
Countries and industries moved fast to mitigate the oil price shock, using up stockpiles, replacing other suppliers and energy sources and decreasing oil consumption, Petya Koeva Brooks, IMF’s deputy research director told Reuters in an interview. These steps saved global growth from shrinking to 2.5% this year, she said, but their effect is diminishing as the conflict continues.
The IMF highlighted a growing divide between countries that are gaining from AI and those being left behind. Now only 32 countries contribute for 95% of global growth, down from 54 in April.
More downward growth revisions. Since the April prediction, the IMF has cut forecasts for 47% of economies, including a number of energy importers outside AI value chains.
The downgrades struck hardest the Gulf states most directly affected by the US-Israeli assault on Iran. Saudi Arabia’s GDP is now expected to drop 3.3% this year, compared to an anticipated 1.7% expansion in July.
Iran, Iraq, Kuwait, Qatar and the United Arab Emirates all are anticipated to be in serious recessions, contracting by 7.6%, 16%, 16.7%, 15.6% and 3.9%, respectively, in 2026.
FLAT IN THE US, EUROPE STILL RECOVERING
The IMF estimated US growth of 2.3% for both 2026 and 2027 among large economies, unchanged for this year and 0.1 percentage point higher for next year. US growth should be underpinned by strong private consumption, tax cuts and AI investment, but the AI boost will be diluted by the huge import content.