TL;DR

The IMF has raised its 2026 global growth forecast to 3.3%, up 0.2 percentage points from October estimates. Massive AI infrastructure investment and businesses adapting to reduced US tariff rates are driving the improved outlook. The Fund warns that unrealised AI productivity expectations could trigger market corrections.

Global Economy Shows Resilience

The International Monetary Fund’s latest World Economic Outlook update reveals that the global economy is weathering trade disruptions better than anticipated. IMF chief economist Pierre-Olivier Gourinchas noted that growth forecasts now exceed predictions made before the 2024 US election, suggesting businesses have successfully adapted to the changed trade landscape.

The improved outlook reflects several converging factors. Trade deals have reduced effective US tariff rates from approximately 25% to 18.5%, whilst businesses have rerouted supply chains and China has shifted exports to non-US markets including Southeast Asia and Europe.

AI Investment Driving US Growth

The United States saw a notable upgrade to its 2026 growth forecast, now estimated at 2.4%—up 0.3 percentage points from October. This boost stems largely from massive investment in AI infrastructure, including data centres, powerful chips, and power generation capacity.

Technology investment is also benefiting other economies. Spain received a 0.3 percentage point upgrade to 2.3% growth, whilst the UK maintained its 1.3% forecast with AI investment providing support.

Risks and Opportunities Ahead

The IMF identified AI as both an opportunity and a risk. On the upside, rapid adoption could lift global growth by up to 0.3 percentage points in 2026 and between 0.1 and 0.8 percentage points annually in the medium term.

However, if AI-driven productivity gains fail to materialise, this could spark corrections in high market valuations. The Fund also flagged potential inflation risks if AI investment continues at its current breakneck pace.

Looking Forward

China’s 2026 growth is forecast at 4.5%, benefiting from reduced US tariff rates and export diversification. The eurozone expects 1.3% growth, supported by increased German public spending. With global inflation forecast to decline from 4.1% in 2025 to 3.8% in 2026, central banks may have room for more accommodative monetary policy.