IMF expects global economic growth of 3.1% in 2026 - Sarmad

The International Monetary Fund (IMF) has forecast global economic growth of 3.1 percent in 2026, up from its July projection of 3 percent, despite the ongoing conflict in the Middle East and rising energy costs, and at a slower pace than the 3.5 percent growth recorded last year.

This was stated in the World Economic Outlook report released on Tuesday, coinciding with the annual meetings of the IMF and the World Bank held in Bangkok, the capital of Thailand.

The Fund projected global economic growth of 3.4 percent in 2027, unchanged from its July estimates, but an increase of 0.2 percentage points compared to projections issued in April.

The slight improvement in growth forecasts was attributed to continued strong investments in artificial intelligence (AI) infrastructure, which helped offset some of the negative effects of higher energy prices and led to upgraded growth estimates for several advanced economies and countries participating in technology supply chains.

The report highlighted that South Korea, Malaysia, Mexico, and Thailand are benefiting from increased 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. Only 32 countries now account for approximately 95 percent of global economic growth, down from 54 countries in the April estimates.

The Fund clarified that downward revisions in growth forecasts have become more widespread, as it has 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 that the general consumer price index will reach 4.7 percent in 2026 before declining to 4.1 percent in 2027, with continued upward price pressures linked to the surge in AI-related investments.

On the issue of public finances, the Fund 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 face future crises, while establishing credible medium-term plans to bring public debt back to sustainable levels.”

For her part, IMF Chief Economist Silvana Tenreyro told journalists that the global economy has shown resilience, but it is “facing increasing pressures,” with growth-related risks leaning toward the “negative” side.

Tenreyro warned that “a prolonged conflict in the Middle East could impose additional pressure on inflation and lead to a slowdown in global growth.”

The official pointed out that “deteriorating public finances, reassessments of the profitability of AI investments, and extreme weather events could further weaken economic outlooks.”

Bangkok is hosting the annual meetings of the IMF and the World Bank Group from October 12 to 18, with 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.