IMF sees steady global growth in 2026 as AI boom offsets trade headwinds

The International Monetary Fund (IMF) has once again raised its global growth forecast for 2026, citing businesses and economies’ ability to adjust to U.S. tariffs and a strong surge in artificial intelligence (AI) investments.

In its latest World Economic Outlook update, the IMF projected global GDP growth at 3.3% in 2026, up 0.2 percentage points from its October estimate. The IMF also maintained 3.3% growth for 2025, which exceeds its October forecast by 0.1 percentage point.

The IMF predicted global growth of 3.2% in 2027, unchanged from the previous outlook.

Trade Adjustments and AI Investment Boost Growth

The IMF has revised global growth upward since July, following trade agreements that eased U.S. tariffs imposed under President Donald Trump, which peaked in April 2025.

“We find that global growth remains quite resilient,” IMF Chief Economist Pierre-Olivier Gourinchas told reporters. He noted that the IMF’s 2025 and 2026 growth forecasts now exceed projections made in October 2024—before Trump’s second term began.

“In a sense, the global economy is shaking off the trade and tariff disruptions of 2025 and is coming out ahead of what we were expecting before it all started,” he added.

Gourinchas explained that businesses have adapted to higher U.S. tariff rates by rerouting supply chains. Trade agreements have reduced some duties, and China has shifted exports to markets outside the U.S.

The IMF’s latest forecast assumes an effective U.S. tariff rate of 18.5%, down from approximately 25% in its April 2025 forecast.

U.S. Growth Driven by AI Infrastructure Investment

The IMF projected U.S. growth at 2.4% in 2026, up 0.3 percentage points from October, driven largely by massive investments in AI infrastructure, including data centers, advanced AI chips, and power capacity.

The IMF also slightly lowered its 2027 U.S. growth forecast to 2.0%.

AI’s Risks and Rewards

The IMF highlighted that the AI boom could raise inflation risks if it continues at a rapid pace. However, it also warned that if AI-driven productivity gains and profits fail to materialize, market valuations could correct, reducing demand.

The IMF listed AI among several downside risks, including supply chain disruptions from geopolitical tensions and potential new trade conflicts.

A Supreme Court decision expected soon regarding Trump’s broad tariffs under an emergency sanctions law could introduce additional uncertainty if new tariffs are imposed under alternative trade laws.

AI Investment Could Lift Global Growth

Despite the risks, the IMF said AI could significantly benefit the global economy if investments lead to rapid adoption and productivity improvements.

“As a result, global growth may be lifted by as much as 0.3 percentage points in 2026 and between 0.1 and 0.8 percentage points per year in the medium term,” the IMF stated, depending on how quickly AI adoption spreads and global AI readiness improves.

Outlook for Major Economies

The IMF projected China’s growth at 4.5% in 2026, down from 5.0% in 2025, but 0.3 percentage points higher than October forecasts. This upgrade reflects lower U.S. tariffs on Chinese goods and a shift in exports toward Southeast Asia and Europe.

However, Gourinchas warned that China could face more protectionist trade policies unless it develops a more balanced growth model that relies more on domestic demand than exports.

The IMF forecast Eurozone growth at 1.3% in 2026, up 0.1 percentage points from October. This is driven by increased public spending in Germany and stronger performance in Spain and Ireland.

Japan also saw a slight upgrade due to a new government fiscal stimulus package. Meanwhile, Brazil was downgraded, with 2026 growth falling to 1.6%, down 0.3 percentage points from October. The downgrade reflects tighter monetary policy aimed at controlling inflation.

Inflation Expected to Continue Declining

Globally, inflation is expected to fall from 4.1% in 2025 to 3.8% in 2026, and further to 3.4% in 2027. Gourinchas said this could allow for more accommodative monetary policy, supporting growth. -Reporting by David Lawder; Editing by Anna Driver/Reuters