The International Monetary Fund (IMF) has slightly upgraded its forecast for global economic growth in 2026, projecting the world economy to expand by 3.1%, while warning that geopolitical tensions, rising public debt and uncertainty surrounding artificial intelligence (AI) investments could threaten the outlook.
In its latest World Economic Outlook, released on Tuesday, October 13, the IMF raised its growth projection from the 3.0% forecast it made in July. However, the new estimate remains below the 3.5% global growth recorded in 2025.
The Fund also projects global growth of 3.4% in 2027, provided the economic conditions underpinning its forecast broadly hold.
AI investment supports global growth
Continued investment in artificial intelligence infrastructure has become an important driver of economic activity, particularly in advanced economies and countries supplying the technology hardware needed to develop AI systems.
Spending on data centres, computing equipment and other AI-related infrastructure has helped support growth despite the pressure created by higher energy prices and geopolitical uncertainty.
Countries involved in supplying AI hardware, including South Korea, Malaysia, Mexico and Thailand, are among those benefiting from this investment activity.
However, the IMF has warned that the benefits of the AI boom are not being distributed evenly across the global economy.
According to reporting on the outlook, the Fund highlighted an increasing concentration of global growth in a smaller number of countries, leaving some economies more exposed to economic shocks.
Middle East conflict and oil prices pose risks
The prolonged conflict in the Middle East remains another major concern for the global economy.
Disruptions to energy supplies and shipping routes have contributed to higher oil prices, increasing costs for businesses and households and putting pressure on inflation.
The IMF's central forecast assumes an average oil price of about US$96 per barrel in 2026, followed by approximately US$87 in 2027.
But a more severe scenario could produce weaker economic growth. The Fund warned that if worsening conflict pushed oil prices to US$130 per barrel through the first quarter of 2027, global growth could be reduced by 0.2 percentage points in 2026 and 0.5 percentage points in 2027.
Higher energy costs could also complicate efforts by central banks to control inflation, while increasing pressure on governments and businesses that depend heavily on imported fuel.
Rising government debt raises concerns
The IMF has also cautioned that elevated public debt and higher borrowing costs could weigh on economic activity.
Governments facing large debt obligations may have less room to respond to emergencies, invest in essential services or support their economies during periods of uncertainty.
The Fund is urging policymakers to establish credible medium-term plans to manage public finances and rebuild financial buffers.
Such measures could help countries become more resilient to future shocks rather than relying primarily on short-term responses after a crisis has already begun.
Could an AI slowdown hurt the world economy?
Although AI investment is currently supporting growth, the IMF has warned that expectations surrounding the technology could become a source of financial instability.
If businesses fail to generate the productivity improvements and profits investors expect, investment could slow sharply. A fall in AI-related asset values could then affect financial markets, spending and economic activity beyond the technology sector.
On the other hand, faster AI adoption and stronger productivity gains could provide an additional boost to global output over time.
The outcome will depend partly on whether the economic benefits of AI justify the substantial investment being made in the technology.
What the outlook means for developing economies
For developing countries, including those in Africa, the global outlook highlights the importance of managing exposure to external shocks.
Higher oil prices can increase transport, electricity and production costs, particularly in economies that depend on imported petroleum products. Higher international borrowing costs can also make it more expensive for governments to finance public spending and service existing debt.
At the same time, countries that strengthen their productive capacity, improve fiscal management and invest in skills and technology may be better positioned to benefit from changing global economic opportunities.
The IMF's forecast suggests that the world economy remains on a growth path, but the risks surrounding that growth have not disappeared.
The bottom line: Global growth is expected to remain above 3% in 2026, supported in part by AI investment. However, the durability of that growth will depend on developments in the Middle East, energy markets, public finances and the ability of AI investment to deliver lasting economic benefits.
Sources: "Reuters — AI investment props up global growth, but war and debt threaten outlook" (https://www.reuters.com/world/china/imf-says-ai-investment-propping-up-global-growth-war-debt-threaten-outlook-2026-10-13/) | "Associated Press — IMF raises its forecast for world growth this year" (https://apnews.com/article/23aa01c0c6922fbf0b564a0ff9b2c8e5) | "International Monetary Fund" (https://www.imf.org/)
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