AI investment props up global growth, but war and debt threaten outlook, IMF says

The International Monetary Fund expects global growth of 3.1% in 2026, a slight upgrade from the 3.0% it projected in July, despite a longer war in the Middle East that has kept oil above $100 a barrel. In its World Economic Outlook, released as leaders gathered in Bangkok for the annual meetings, the Fund said strong investment in artificial intelligence is offsetting the energy shock. Its 2027 forecast stands at 3.4%, unchanged from July.

Business Recorder reported that the upward revision mostly reflects AI investment, with upgrades for hardware suppliers including South Korea, Malaysia, Mexico and Thailand. The Fund warned that downside risks are building, including a prolonged war, higher bond yields, El Nino weather events and a sharp reassessment of AI profitability. Gulf economies were hit hardest, with Saudi Arabia's GDP now forecast to contract 3.3% this year.

The forecasts assume oil averages $96 a barrel in 2026 and that the Strait of Hormuz reopens in March 2027. The report also warns that high public debt, particularly in advanced economies, raises the risk of costlier borrowing, and it urges governments to rebuild fiscal buffers.