IMF upgrades global growth outlook as AI boom offsets energy shock

Bangkok: The International Monetary Fund (IMF) on Tuesday slightly upgraded its outlook for the global economy this year, although it still forecasts relatively sluggish growth of 3.1%. The IMF had projected global growth of 3.0% in July. The world economy expanded at an annual rate of 3.5% in 2025. According to the IMF's World Economic Outlook, growth in the United States is expected to remain steady at 2.3% in both 2026 and 2027. The fund said it now expects oil prices to rise by nearly 41% this year, averaging $96 a barrel. As a result, global inflation is forecast to increase to 4.7% in 2026 from 4.1% last year. The update, released as global economic and financial leaders gather in Bangkok for the IMF and World Bank annual meetings, said the boom in artificial intelligence is helping to offset the damage caused by sharply higher oil and gas prices. However, the benefits of the AI boom are not being shared evenly. The United States and China account for more than three-quarters of net demand for imports of computer chips and other AI-related equipment, the report said. “The outlook is highly uneven,” Silvana Tenreyro, the IMF's research director, told reporters in Bangkok. Growth is becoming increasingly concentrated, with 32 countries accounting for 95% of global growth, compared with 54 countries in April. “The global economy is not simply slowing or accelerating; rather, growth is being reallocated across countries according to their exposure to the war-induced supply shock and AI-related demand strength,” the report said. AI's impact on employment is a key focus of the Bangkok meetings. IMF Managing Director Kristalina Georgieva described it on Monday as “a slow-moving tsunami, but a tsunami nonetheless”. “The impact over time on jobs globally we estimate to be around 40% – jobs either augmented, downgraded or eliminated. And we are already seeing some of this impact,” she said. Last week, Georgieva urged both wealthy and developing countries to strengthen their public finances, warning that rising debt levels pose a growing threat to global financial stability. That concern is especially relevant at a time of high borrowing costs, Tenreyro said. The report forecasts that growth in advanced economies will edge up to 2.1% this year from 2.0% in 2025, before easing to 1.9% next year. The projections assume that shipments of oil and gas through the Strait of Hormuz resume by March and that growth in AI-related demand moderates. US growth is expected to remain unchanged at 2.3%. Countries that are relatively insulated from the energy shocks linked to the Iran war and are benefiting from rapid AI adoption are managing to maintain growth. However, developing and emerging economies that are more vulnerable to higher oil and gas costs are expected to see growth slow to 3.7% this year from 4.5% in 2025. The IMF forecasts a recovery to 4.4% growth next year. The outlook is considerably weaker in the Middle East and Central Asia, where economies are expected to contract this year before rebounding to growth of 6.3% in 2027. The 21 countries that use the euro are forecast to grow by 1.1% this year and 1.2% in 2027. China, the world’s second-largest economy, is expected to expand by 4.5% this year, down from 5.0% in 2025 and in line with the government’s official target. India is once again projected to be the world’s fastest-growing major economy, expanding by 7.0%, down from 7.7% last year. The IMF is a 191-member lending organisation that works to promote economic growth, financial stability and poverty reduction. At the Bangkok meetings, finance ministers and central bank governors will assess the state of the global economy and discuss strategies to support financial stability and sustainable growth.