IMF Flags Resilient 2026 Outlook Despite Trade Headwinds, Bets on AI Boom

The International Monetary Fund (IMF) on Monday said the global economy is likely to maintain steady growth of 3.3% in 2026. This is a result of a surge in investment linked to artificial intelligence and digital infrastructure, helping counterbalance persistent trade headwinds and policy uncertainty.

The forecast, published as part of the IMF’s latest World Economic Outlook update, keeps global growth broadly unchanged from 2025 levels and represents a modest improvement over projections made late last year.

IMF officials said the outlook reflects an economy that has adjusted to higher tariffs, tighter financial conditions and geopolitical disruptions, while benefiting from a renewed global investment cycle led by technology.

AI Investment Emerges As Key Growth Driver

A central pillar of the IMF’s outlook is the rapid expansion of AI-related capital spending, particularly in advanced economies. Investment in data centres, cloud infrastructure, semiconductor capacity, and automation tools has helped support demand and lift productivity expectations.

According to the IMF, the current wave of AI adoption could add up to 0.3 percentage points to global growth in 2026, with stronger effects possible over the medium term if productivity gains are sustained and widely diffused across sectors.

The impact is most visible in the United States, where technology-driven investment has supported a stronger-than-expected growth trajectory. The IMF now expects the US economy to expand by around 2.4% in 2026, an upward revision from earlier estimates.

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Trade Headwinds Persist, But Impact Eases

Despite the positive impulse from technology spending, the IMF cautioned that trade remains a key drag on the global outlook. Higher tariff barriers, export controls, and strategic trade restrictions introduced over the past two years continue to weigh on cross-border flows.

However, the Fund noted that businesses have adapted by restructuring supply chains, diversifying sourcing, and absorbing higher costs, reducing the overall growth impact compared with initial expectations.

The IMF’s baseline forecast assumes that current tariff levels remain broadly stable, with no sharp escalation in trade disputes. Any renewed rise in protectionism, it warned, could quickly erode growth momentum.

Mixed Regional Outlook

The IMF’s projections point to uneven growth across regions:

• China is expected to grow by about 4.5% in 2026, supported by exports, targeted policy support, and a gradual stabilisation in domestic demand.
• The eurozone is forecast to expand by roughly 1.3%, reflecting weak industrial momentum but improving financial conditions.
• Growth in emerging markets remains stronger than in advanced economies, though tighter global financial conditions and currency pressures pose ongoing risks.

Inflation Cooling, Easing Policy Pressure

Worldwide inflation is projected to fall below 4% in 2026, down from the peaks seen in the immediate post-pandemic period. Easing inflation has allowed several central banks to pause or gradually unwind monetary tightening, supporting investment and credit growth. However, the IMF cautioned that inflation progress remains uneven across countries and sectors.

Risks Tied To AI Expectations

While highlighting AI as a major upside, the IMF also flagged execution risks. If productivity gains from AI fail to materialise at scale, or if investment slows due to financial or regulatory constraints, growth could undershoot projections. The Fund warned that over-concentration of AI benefits in a handful of firms or economies could widen inequality and reduce the broader economic impact.

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