IMF raises its forecast for world growth this year but says economies will slow in 2027

BANGKOK (AP) — The International Monetary Fund on Tuesday slightly upgraded its outlook for the world economy for this year, but it’s still forecasting growth at a sluggish 3.1%.

The IMF had forecast global growth at 3.0% in July. The world economy expanded at a 3.5% annual pace in 2025.

The IMF Economic Outlook predicts that growth in the United States will remain steady at 2.3% in 2026 and 2027.

It said it now expects oil prices to be up nearly 41% this year, at an average of $96 a barrel, boosting global inflation to 4.7% in 2026 from 4.1% last year.

The update released Tuesday, as world economic and financial leaders gather in Bangkok for the fall meetings of the IMF and World Bank, says the boom in artificial intelligence is offsetting damage from sharply higher prices for oil and gas.

AI has uneven impacts

But the benefits of the AI boom are not shared equally: the U.S. and China account for more than three-quarters of net demand for imports of computer chips and other AI-related equipment, it said.

“The outlook is highly uneven,” Silvana Tenreyro, the IMF’s director of research, told reporters in Bangkok.

Growth is increasingly concentrated, with 32 countries accounting for 95% of global growth, the report said. That compares with 54 countries as of April.

“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 says.

AI’s effects on employment are a key focus of the meetings in Bangkok, which IMF Managing Director Kristalina Georgieva described during an event 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.

Debt remains a key concern

Last week, the IMF chief urged countries both rich and poor to do a better job of improving their national finances, noting that mounting levels of debt pose a growing risk to global financial stability.

That’s especially true at a time of high borrowing costs, Tenreyro said.

The report said growth in the advanced economies is forecast to pick up slightly this year, to 2.1% from 2.0% in 2025, and then to slow to 1.9% next year.

It based its forecasts on the assumption that shipments of oil and gas through the Strait of Hormuz will resume by March, and that the boom in AI demand will moderate.

Growth in the U.S. will remain flat, at 2.3%, it said.

Countries that are somewhat insulated from the energy shocks of the Iran war and that are benefiting from rapid adoption of AI are managing to keep growth on track. But developing economies and emerging markets more vulnerable to higher costs for oil and gas will see growth slow to 3.7% this year from 4.5% in 2025, the report says. It forecasts they will regain momentum next year, expanding at a 4.4% annual pace.

The situation is much worse in the Middle East and Central Asia, where those regions’ economies are expected to contract this year before recovering to a 6.3% rate of growth in 2027.

Outlooks vary by region

The 21 European countries that share the euro currency are expected to grow by 1.1% this year and 1.2% in 2027.

China, the world’s No. 2 economy, is expected to expand 4.5% this year, down from 5% in 2025, in line with the government’s official target.

India is once again forecast to be the world’s fastest-growing major economy, advancing at a 7% clip, down from a sizzling 7.7% last year.

The IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty. At the meetings in Bangkok, finance ministers and central bank governors will assess the state of the world economy and discuss strategies to support financial stability and sustained growth.

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AP journalists Haruka Nuga and Tian Macleod Ji contributed.