The International Monetary Fund (IMF) on Tuesday slightly upgraded its outlook for the global economy for this year, forecasting growth of 3.1 per cent, as strong demand for artificial intelligence (AI) helped offset the damage from sharply higher oil and gas prices.
The IMF had forecast global growth at 3.0 per cent in July. The world economy expanded at an annual pace of 3.5 per cent in 2025.
The IMF's latest Economic Outlook, released as world economic and financial leaders gather in Bangkok for the fall meetings of the IMF and World Bank, said the AI boom was bolstering growth in China, India and other Asian countries, helping global trade expand faster than it otherwise would have.
The IMF's new chief economist, Silvana Tenreyro, said strong demand for AI had outpaced overall growth in global trade. Global trade grew 8.3 per cent between 2023 and 2025, while trade in AI-related goods expanded by 29 per cent. Without AI-related trade, overall trade growth would have been just 4.6 per cent, she told reporters at the annual meetings.
A long-time professor at the London School of Economics, Tenreyro started her new job at the IMF in August.
India is once again forecast to be the world's fastest-growing major economy, expanding by 7 per cent, down from 7.7 per cent last year. China, the world's second-largest economy, is expected to grow by 4.5 per cent this year, compared with 5 per cent in 2025, in line with the government's official target.
The IMF expects growth in the United States to remain steady at 2.3 per cent in both 2026 and 2027. Growth in advanced economies is forecast to pick up slightly to 2.1 per cent this year from 2 per cent in 2025, before slowing to 1.9 per cent next year.
The 21 European countries that share the euro currency are expected to grow by 1.1 per cent this year and 1.2 per cent in 2027.
However, the benefits of the AI boom are not being shared equally. The US and China account for more than three-quarters of net demand for imports of computer chips and other AI-related equipment, the report said.
“The outlook is highly uneven,” Tenreyro told reporters in Bangkok.
Growth is becoming increasingly concentrated, with 32 countries accounting for 95 per cent of global growth, compared with 54 countries in April, the report said.
“The global economy is not simply slowing or accelerating; rather, growth is being reallocated across countries according to their exposure to the war-induced supply shock and AI-related demand strength,” it said.
The IMF expects oil prices to rise nearly 41 per cent this year, reaching an average of $96 a barrel. This is projected to push global inflation to 4.7 per cent in 2026, up from 4.1 per cent last year.
The forecasts are based on the assumption that shipments of oil and gas through the Strait of Hormuz will resume by March and that demand linked to the AI boom will moderate.
Countries relatively insulated from energy shocks stemming from the Iran war and benefiting from rapid AI adoption are managing to keep growth on track. Developing economies and emerging markets more vulnerable to higher oil and gas costs, however, are expected to see growth slow to 3.7 per cent this year from 4.5 per cent in 2025, before recovering to 4.4 per cent in 2027.
The outlook is particularly difficult for the Middle East and Central Asia, where economies are expected to contract this year before recovering to a growth rate of 6.3 per cent in 2027.
Tenreyro said the IMF remained concerned about high debt levels and urged countries to cut budgets to reduce deficits. She also said central banks should pursue more restrictive policies, including raising interest rates, to bring inflation back to target.
Last week, the IMF chief urged both rich and poor countries to improve their public finances, warning that mounting debt posed a growing threat to global financial stability, particularly amid high borrowing costs.
The IMF also flagged the risks of a correction in market valuations and AI-related cybersecurity threats, warning that both could weigh on growth and add to financial stability concerns.
Tenreyro said the IMF's baseline forecast assumed the AI boom would dissipate over time. An alternative scenario suggested that if the boom continued and delivered genuine productivity gains, those gains could limit its inflationary impact.
If AI demand persisted without generating productivity gains, however, the boost to growth would be smaller and inflation higher, she said. A reassessment of the profitability gains expected from AI could also lead to a downward adjustment in demand.
“It's basically an unwind of this boom that we are seeing,” Tenreyro said, adding that the IMF was updating its research on AI's impact on jobs.
The effects of AI on employment are a key focus of the meetings in Bangkok. IMF Managing Director Kristalina Georgieva described the technology's impact during an event on Monday as “a slow moving tsunami, but tsunami nonetheless”.
“The impact over time on jobs globally we estimate to be around 40% - jobs either augmented or downgraded or eliminated. And we are already seeing some of this impact,” she said.
The IMF is a 191-nation lending organisation that works to promote economic growth and financial stability and reduce global poverty. At the meetings in Bangkok, finance ministers and central bank governors are assessing the state of the world economy and discussing strategies to support financial stability and sustained growth.