The International Monetary Fund (IMF) has raised its forecast for global economic growth in 2026 to 3.1 per cent from 3.0 per cent, while warning that rising government debt, persistent inflation risks and ongoing conflicts could trigger sharp increases in bond yields and destabilise financial markets. The revised outlook, released on October 13, 2026, reflects stronger economic activity supported partly by investment in artificial intelligence, although the Fund cautioned that the expansion remains vulnerable to major global shocks.
The IMF expects global growth to accelerate to 3.4 per cent in 2027, following estimated growth of 3.5 per cent in 2025. Despite the upward revision, the outlook points to a slower pace of expansion than last year, with economies facing uncertainty over energy prices, geopolitical tensions and financial conditions.
Investment in AI infrastructure has helped support activity, particularly in the United States and China, as businesses spend on computing capacity, data centres and advanced technologies. However, the Fund warned that the benefits could be uneven and that a sudden reassessment of AI-related valuations could affect financial markets and investment.
The IMF also highlighted mounting public debt as a significant concern. Governments face pressure to finance spending commitments while managing borrowing costs, with higher inflation or renewed energy shocks potentially pushing bond yields sharply upwards. Such movements could increase debt-servicing expenses, tighten financial conditions and place additional pressure on countries with limited fiscal space.
Ongoing conflicts and disruptions to energy supplies remain additional risks to the global outlook. Higher fuel and food prices could revive inflationary pressures, complicating decisions by central banks as they balance price stability against economic growth.
The Fund’s assessment also points to differing prospects across major economies. The United States is projected to grow by 2.3 per cent in 2026, while China’s economy is forecast to expand by 4.5 per cent. India is expected to remain among the fastest-growing major economies, with projected growth of 7 per cent.
The IMF’s revised forecast signals resilience in the global economy but underscores the importance of responsible fiscal management, monitoring financial risks and preparing for potential market volatility.
