Economy
IMF sees global growth slowing to 3.1% in 2026 as energy shock meets AI investment boom
The IMF's October World Economic Outlook projects global growth of 3.1% in 2026 and 3.4% in 2027, with headline inflation rising to 4.7% this year.
Key points
- Global growth is projected at 3.1% in 2026 and 3.4% in 2027; global headline inflation is expected to reach 4.7% in 2026 before easing to 4.1%.
- The IMF describes the Middle East conflict as a negative supply shock and AI-driven investment as a positive demand shock.
- Risks are tilted to the downside, and the Fund calls for restrained fiscal policy and monetary policy that stays focused on price stability.
The International Monetary Fund projects global growth of 3.1 percent in 2026 and 3.4 percent in 2027 in its October World Economic Outlook, released on October 13 during the Fund's annual meetings in Washington. Global headline inflation is expected to rise to 4.7 percent in 2026 before easing to 4.1 percent in 2027, with core inflation at 3.9 percent and 3.7 percent.
Two forces pull in opposite directions. Higher energy prices linked to the conflict in the Middle East are weighing on energy importers, while an artificial intelligence-driven investment boom has lifted activity and supported trade. In a blog accompanying the report, IMF chief economist Silvana Tenreyro wrote that two adjustments have cushioned the energy shock so far: rerouted and expanded supply, and substitution and efficiency gains. She warned that "dwindling energy inventories could amplify transmission of geopolitical shocks to energy prices."
Among the largest economies, the Fund expects the United States to grow 2.3 percent in both years, the euro area 1.1 percent in 2026 and 1.2 percent in 2027, China 4.5 percent this year and 4.0 percent next year, and India 7.0 percent a year, according to figures reported from the Fund's press briefing.
The IMF lists several risks. Low-income countries and households are exposed to higher food prices from transport disruptions and fertilizer costs. Technology investment is concentrating risk in a small number of firms, sectors and economies. Rising borrowing costs in major advanced economies, combined with high public debt, add vulnerability. A scenario with higher commodity prices and renewed fiscal concerns would lower 2027 growth below the baseline and raise inflation.
On policy, the Fund says fiscal policy "must be restrained and help contain demand pressures amid heightened inflationary risks," and that monetary policy should stay restrictive enough to return inflation to target on time, tightening further if commodity prices or technology investment feed persistent inflation. "Central bank independence remains vital," the blog adds.