IMF Forecasts Steady Global Growth in 2026 as AI Boom Counters Trade Pressures

The global economy is expected to remain resilient in 2026 despite trade uncertainties and geopolitical risks. According to the latest outlook by the International Monetary Fund, rapid investment in artificial intelligence is helping offset tariff-related pressures and supply chain disruptions. The IMF believes this technology-led momentum will support stable growth across major economies in the coming year.

Why in News?

The IMF has raised its global growth forecast for 2026 to 3.3%. The upgrade is driven mainly by strong AI investment and easing trade tensions, especially in the US.

IMF’s Latest Global Growth Projections

• In its updated World Economic Outlook, the International Monetary Fund projected global GDP growth of 3.3% in 2026, up by 0.2 percentage points from its October estimate.
• Growth in 2025 is also expected at 3.3%, slightly higher than earlier forecasts.
• The IMF sees 2027 growth at 3.2%, indicating steady but moderate expansion in the global economy.

Role of AI in Driving Growth

• A key driver behind the improved outlook is the artificial intelligence investment boom.
• Massive spending on data centres, AI chips, digital infrastructure and power systems has lifted asset wealth and productivity expectations.
• According to the IMF, if AI adoption accelerates and productivity gains materialise, global growth could increase by up to 0.3 percentage points in 2026, with even higher gains possible in the medium term.

Trade Tensions and Tariff Adjustments

• The IMF noted that global growth forecasts have improved since mid-2025 due to reduced US tariff rates following trade agreements.
• Businesses have adapted by rerouting supply chains, while countries like China have diversified exports to non US markets.
• The IMF now assumes an effective US tariff rate of 18.5%, down from about 25% earlier projected, easing pressure on global trade flows.

Major Economy-Wise Growth Outlook

• The IMF upgraded US growth for 2026 to 2.4%, citing AI-driven investment and tax incentives.
• China’s growth is projected at 4.5% in 2026, supported by lower US tariffs and export diversification, though slower than 2025.
• The euro zone is expected to grow at 1.3%, helped by public spending in Germany and strong performance in Spain and Ireland.
• Japan received a modest upgrade due to fiscal stimulus, while Brazil’s outlook was downgraded due to tighter monetary policy.

Inflation and Monetary Policy Outlook

• Globally, inflation is expected to continue declining, from 4.1% in 2025 to 3.8% in 2026 and 3.4% in 2027.
• This trend gives central banks room for more accommodative monetary policies, which could further support growth.
• However, the IMF cautioned that rapid AI expansion could create inflationary pressures if investment overheats.

Risks Highlighted by the IMF

• Despite the positive outlook, risks remain tilted to the downside.
• These include renewed trade flare-ups, geopolitical tensions, supply chain disruptions and the possibility of a market correction if AI-driven productivity gains fail to meet expectations.
• IMF Chief Economist Pierre-Olivier Gourinchas warned that sudden policy shifts or legal challenges to tariffs could reintroduce uncertainty into the global economy.

World Economic Outlook (WEO) – Overview

• A comprehensive economic report published by the International Monetary Fund (IMF)
• Serves as a key reference for global and national economic trends
• Widely used by governments, policymakers, researchers, and economists

Publication Schedule

Published twice a year,

• April
• October

WEO Updates (shorter versions) released in,

• January
• July

Coverage and Content

Provides IMF estimates and forecasts on,

• Global output growth
• Inflation trends

Country-level data for 190 IMF member countries, including,

• Real GDP growth
• Consumer price inflation
• Current account balances
• Unemployment rates

Countries are grouped by,

• Region
• Level of economic development (advanced, emerging, developing)

Key Summary at a Glance

Question

Q. According to the IMF, what is the projected global GDP growth rate for 2026?

A. 2.8%
B. 3.0%
C. 3.3%
D. 3.6%