IMF raises 2026 growth forecast but warns of AI, war and debt risks

The International Monetary Fund raised its 2026 global growth forecast slightly to 3.1%, saying economic activity held up better than expected in the first half of the year despite the Middle East war, higher energy prices and policy uncertainty.

In reports released during the IMF and World Bank annual meetings in Bangkok, the fund said AI-related investment, flexible supply responses, rerouted shipments, inventory drawdowns and government support had helped sustain growth. Advanced economies are forecast to expand by 2.1% in 2026, although outcomes vary sharply depending on exposure to energy disruption and participation in AI supply chains.

The IMF also warned that weaker-than-expected returns from AI investment could trigger a correction in AI-linked equities and credit. Other near-term financial risks include renewed inflation and rising sovereign bond yields, as well as severe cyber incidents capable of disrupting critical financial infrastructure.

Low-income oil-importing countries outside the AI investment boom face the greatest strain from rising energy and food costs, the IMF said. Many already have limited fiscal room and high debt. IMF deputy research director Petya Koeva Brooks said vulnerable governments should use narrowly targeted subsidies, cut spending where necessary and pursue timely debt restructuring when borrowing is unsustainable.

The fund separately urged governments to rebuild fiscal buffers. For Britain, IMF chief economist Silvana Tenreyro called for continued deficit reduction and restraint in cost-of-living support to avoid adding to inflation amid higher debt-servicing, defence and energy costs.