The International Monetary Fund (IMF) has raised its global economic growth forecasts, attributing the revised outlook to resilient growth, sustained investment in artificial intelligence (AI), and businesses' adaptation to trade dynamics. While the global economy is described as "steady" and "resilient," the IMF also highlighted significant downside risks, including a potential reversal in the AI boom, escalating trade tensions, and geopolitical instability.
Global Growth Projections
The IMF's latest World Economic Outlook projects global GDP growth at 3.3% for 2025, a 0.1% increase from its previous estimate. The forecast for 2026 has been raised by 0.2% to 3.3%, while the projection for 2027 remains at 3.2%. IMF chief economist Pierre-Olivier Gourinchas noted that global growth remains resilient, with the 2025 and 2026 forecasts now exceeding predictions made prior to recent tariff disruptions.
This upward revision is partly attributed to "tailwinds from surging investment related to technology, including artificial intelligence," and businesses' adaptation to U.S. tariffs by rerouting supply chains. Additionally, new trade agreements have reportedly reduced some duties, and China has diversified its exports to non-U.S. markets.
Key Risks to Global Growth
Despite the upgraded outlook, the IMF identified several key downside risks:
- AI Boom Reversal: Overly optimistic expectations regarding AI growth could trigger an abrupt market correction. This also includes the risk of increased firm debt due to AI investments, which could lead to vulnerability during market adjustments.
- Trade Tensions: An escalation of trade tensions or potential new trade disputes could prolong uncertainty and negatively impact economic activity. The IMF's forecasts operate on an assumed effective U.S. tariff rate of 18.5%, a decrease from the approximately 25% projected in its April 2025 forecast.
- Geopolitical and Political Tensions: The eruption of domestic political or geopolitical tensions could introduce uncertainty and disrupt financial markets, supply chains, and commodity prices.
- Inflationary Pressures: There is a potential for heightened inflation if the pace of AI development and adoption continues rapidly.
AI's Dual Impact: Risks and Opportunities
The report identifies AI as a significant driver of current growth, noting substantial investment in technology. However, the IMF also highlighted the potential for a market correction if anticipated AI-driven productivity gains and profits do not materialize.
Conversely, the IMF indicates that AI presents a significant upside for the global economy. If the investment surge leads to rapid adoption and productivity gains are realized, global growth could increase by as much as 0.3% in 2026 and between 0.1% and 0.8% annually in the medium term, depending on the speed of adoption and global AI readiness.
Global and Regional Inflation Outlook
Globally, inflation is projected to continue its decline from an estimated 4.1% in 2025 to 3.8% in 2026, further decreasing to 3.4% in 2027. Gourinchas suggested that this trajectory could allow for more accommodative monetary policies, supporting further growth.
For the United Kingdom, the IMF expects inflation to return to the 2% target by the end of the year. This is anticipated to be influenced by fading price changes in regulated industries and continued moderation of wage growth due to a weakening labor market. Price increases in regulated sectors had contributed to higher inflation in the UK last year, but these effects are expected to subside.
Regional Economic Updates
- United States: The U.S. growth forecast for 2026 increased by 0.3% to 2.4%, largely due to substantial investment in AI infrastructure, including data centers and AI chips. The 2027 forecast was slightly lowered to 2.0%.
- United Kingdom: The IMF estimates the UK economy grew by 1.4% in 2025. The forecast for 2026 remains at 1.3%, positioning the UK as potentially the third-fastest-growing G7 economy, behind the U.S. and Canada. A 1.5% growth is predicted for the UK in 2027.
- Spain: Spain's 2026 GDP forecast saw a 0.3% upgrade to 2.3% due to technology investment.
- China: China's 2026 growth is projected at 4.5%, a 0.3% increase from October estimates, attributed to a 10% reduction in U.S. tariff rates on Chinese goods for a year and continued export diversification. Gourinchas indicated that China may face increased protectionist trade policies without a more balanced growth model.
- Euro Zone: The euro zone's 2026 growth forecast rose by 0.1% to 1.3%, driven by increased public spending in Germany and stronger performances in Spain and Ireland. The 2027 forecast remains at 1.4%.
- Japan: Japan's 2026 growth forecast received a slight upgrade due to its government's fiscal stimulus package.
- Brazil: Brazil's 2026 growth rate was reduced by 0.3% to 1.6% since October, largely due to tighter monetary policy implemented to address inflation.
Central Bank Independence
The IMF emphasized that the independence of central banks is "paramount" and of "critical importance" for maintaining global economic stability and fostering growth.