The AI Boom is Fueling the Global Economy but the IMF Warns of a Bumpy Road Ahead

The International Monetary Fund (IMF) has raised its global economic growth forecast for 2026, citing an artificial intelligence investment boom that has helped cushion the impact of the Middle East war and rising energy prices. However, the organization warned Tuesday that the world's ability to withstand further economic shocks is rapidly diminishing.

In its latest World Economic Outlook, released during the IMF and World Bank annual meetings in Bangkok, the fund projected global growth of 3.1% this year, slightly above its July estimate of 3%. The revised forecast still represents a slowdown from the 3.5% expansion recorded in 2025.

Growth in 2027 is expected to reach 3.4%, unchanged from the previous projection. "The global economy has been resilient, but that resilience is reaching its limits," Silvana Tenreyro, the IMF's economic counsellor and research department director, told reporters Tuesday.

The IMF now expects the Strait of Hormuz, a critical shipping route for global oil supplies, to reopen in March 2027, significantly later than its previous assumption of mid-July 2026. Conditions are not expected to return to pre-war levels until October 2027.

Although Gulf crude exports recovered to approximately 88% of pre-conflict levels in September, global oil reserves are being depleted at a rate of about 2.7 million barrels daily. The IMF cautioned that further reductions could trigger sharp increases in energy prices.

Meanwhile, artificial intelligence has emerged as one of the strongest sources of economic support. Investment in semiconductors, data centers, electricity generation and other AI-related infrastructure helped global activity outperform expectations during the first half of 2026. However, the benefits are concentrated in relatively few economies.

According to the IMF, just 32 countries now account for 95% of global growth, compared with 54 in April. Taiwan is expected to expand 10.7% this year, benefiting from semiconductor demand, while South Korea's growth is projected to accelerate to 3.3%, compared with 1.1% in 2025.

The United States is forecast to grow 2.3% in both 2026 and 2027, supported by consumer spending, government fiscal policies and technology investment. India remains the fastest-growing major economy, with projected expansion of 7% in both years, while China's growth is expected to slow from 4.5% in 2026 to 4% in 2027.

The picture is considerably weaker elsewhere. The euro zone is projected to grow just 1.1% this year, while the Middle East and Central Asia region faces a 0.3% contraction as energy disruptions weigh on economic activity.

The IMF also warned that the AI boom supporting global growth could become a source of financial instability. Massive spending on technology infrastructure is occurring before companies have demonstrated the widespread productivity improvements needed to justify those investments.

If anticipated AI productivity gains fail to materialize, the fund estimates that U.S. stock markets could decline by 20%, while global economic output could fall 1.1% below baseline projections by 2028. Asia could experience an even greater impact, with output 1.7% below expectations.

The IMF maintained its global inflation forecast of 4.7% for 2026 but raised its 2027 estimate to 4.1%, compared with 3.9% in July. It now estimates a 35% probability that global inflation will exceed 5% next year, up from 30% in April. Mounting government debt is further limiting policymakers' options. Public debt in advanced economies is projected to reach 115% of GDP by 2031, compared with 108% in 2025.