IMF expects global economic growth of 3.1% in 2026 and 3.4% in 2027

Kuala Lumpur, Oct 13 (KUNA) -- The International Monetary Fund (IMF) forecast global economic growth of 3.1 percent this year (2026), down from its July projection of 3 percent, despite ongoing conflict in the Middle East and rising energy costs, and at a rate lower than last year’s 3.5 percent growth. This was stated in the IMF’s World Economic Outlook report released Tuesday, coinciding with the annual meetings of the IMF and the World Bank held in Bangkok, the capital of Thailand.

The fund projected global growth of 3.4 percent in 2027, unchanged from its July estimates, but up by 0.2 percentage points compared to its April projections. It attributed the slight improvement in growth forecasts to sustained strong investments in artificial intelligence (AI) infrastructure, which helped offset some of the negative impacts of higher energy prices and led to upward revisions in growth estimates for several advanced economies and countries participating in technology supply chains.

The report highlighted that South Korea, Malaysia, Mexico, and Thailand benefited from rising demand for devices and components used in developing AI technologies, alongside advanced economies that are developing platforms and infrastructure for this technology. It also noted a widening gap between economies benefiting from AI investments and those that have not capitalized on this boom, as only 32 countries now account for approximately 95 percent of global economic growth, compared to 54 countries in the April estimates.

The IMF clarified that downward revisions in growth forecasts have become more widespread, having lowered estimates for about 47 percent of economies since its April projections, including several energy-importing countries not involved in AI-related value chains.

Regarding global inflation, the IMF projected the general consumer price index to reach 4.7 percent in 2026 before declining to 4.1 percent in 2027, with continued upward price pressures linked to the AI investment boom.

On public finances, the IMF warned that rising public debt levels, particularly in advanced economies, increase the risk of sharp spikes in borrowing costs and threaten to weaken economic growth amid ongoing financial and geopolitical volatility. The IMF called on governments “not to delay necessary measures to rebuild reserves and fiscal buffers that enable them to confront future crises, while putting in place credible medium-term plans to bring public debt back to sustainable levels.”

Meanwhile, IMF Chief Economist Silvana Tenreyro told journalists that the global economy has shown resilience but is “facing increasing pressures,” with growth-related risks leaning toward the “negative” side. Tenreyro warned that “prolonged conflict in the Middle East could impose additional inflationary pressures and lead to a slowdown in global growth.” She noted that “deteriorating public finances, reassessment of AI investment profitability, and extreme weather events could further weaken economic outlooks.”

Bangkok is hosting the annual meetings of the IMF and the World Bank from October 12 to 18, with a broad Kuwaiti and international participation comprising thousands of financial officials and economists from around the world to discuss global economic and financial challenges and ways to enhance monetary and investment cooperation. (End)