IMF raises 2026 global growth forecast to 3.3% on AI surge

19/01/2026 10:08 AST

The global economy is expected to grow faster than earlier projected, supported by strong investment in artificial intelligence and improved financial conditions, according to the International Monetary Fund's January 2026 World Economic Outlook update.

The IMF now forecasts global growth of 3.3% in 2026 and 3.2% in 2027, a slight upward revision from its October 2025 projections. Despite ongoing trade tensions and policy uncertainty, the report notes that fiscal support, monetary easing and the private sector's ability to adapt are helping economies stay on track.

Technology investment drives momentum
A major reason for this resilience is the sharp rise in technology and AI-related investment. The IMF says spending on information technology has climbed to the highest level seen in over two decades, particularly in the US.

That surge is feeding into global markets, lifting business activity and supporting Asia's technology export sectors. Global equity markets have also risen significantly since generative AI tools became widely adopted, giving companies easier access to capital and encouraging further expansion.

Financial conditions remain supportive
Accommodative financial conditions and higher corporate earnings are helping sustain the global expansion. However, the IMF warns that this trend is increasingly being funded by debt, raising the risk that companies could struggle if financial conditions tighten or AI returns fail to meet expectations.

Higher leverage, frequent hardware upgrades and changes in profitability assumptions could all pressure firms and create ripple effects across global financial markets.

Lessons from the dot-com boom
The IMF compares the current AI investment cycle with the late 1990s dot-com era. While investment levels are now similar, the pace of growth has been more gradual and backed by stronger earnings, suggesting less risk of immediate overvaluation.

Even so, the report cautions that global growth could still be vulnerable if AI-related stocks correct sharply. Technology companies now play a larger role in global indices, and any significant market repricing could affect consumer spending and confidence worldwide.

What could change the outlook
On the upside, AI could begin delivering measurable productivity gains, adding about 0.3% to global growth this year. On the downside, if investor confidence weakens and technology spending slows, global growth could fall by 0.4% from baseline projections, especially in tech-heavy economies like the US and Asia.

The IMF highlights rising geopolitical tensions, trade restrictions and stretched fiscal balances as key risks that could amplify volatility in the global economy.

Policy guidance from the IMF
The Fund urges policymakers to rebuild fiscal buffers, maintain price and financial stability, and reduce uncertainty. Central banks are advised to stay focused on inflation control while remaining ready to adjust policy if market conditions shift.

The IMF also stresses the need to support workers affected by automation and AI adoption. Governments are encouraged to invest in skills development, promote job mobility, and ensure that the economic benefits of new technologies are broadly shared.

Balancing opportunity with risk
The IMF noted that global growth has held up better than expected in the face of trade disruptions, but warns that the heavy concentration of investment in the technology sector could create new vulnerabilities over time.

AI is delivering a powerful boost to global markets today. Policymakers and investors now face the challenge of turning that momentum into stable, long-term economic growth while guarding against financial and structural risks.

Gulfnews