IMF says AI investment propping up global growth, but war and debt threaten

By David Lawder

BANGKOK, Oct 13 (Reuters) – The global economy will still manage to top 3% real GDP growth this year as strong AI investment offsets the energy shock from the war in the Middle East, but downside risks are mounting and more countries are being left behind and vulnerable to rising debt loads, the International Monetary Fund said on Tuesday.

Despite a more protracted conflict that has kept oil prices ‌above $100 a barrel, the IMF is forecasting 2026 global growth at 3.1%, a slight uptick from the 3.0% it predicted in July.

The World Economic Outlook forecast, released as global economic and finance leaders gather in Bangkok ‌for the IMF and World Bank annual meetings, is about even with the most optimistic scenario issued in April but below 2025 global growth of 3.5%.

For 2027, the IMF predicts 3.4% global growth, flat with the July forecast and up 0.2 percentage point from April.

The slight improvement is largely due to ​continued strong investment in artificial intelligence infrastructure, prompting growth upgrades for key advanced economies building AI platforms and especially for countries supplying AI hardware, including South Korea, Malaysia, Mexico and Thailand, which is hosting the meetings this week.

“The global economy has been resilient, but that resilience is under strain, with risks to growth tilted to the downside,” the IMF’s new chief economist, Silvana Tenreyro, told reporters.

“A prolonged conflict in the Middle East could put additional pressures on inflation and slow down growth. A worsening of fiscal prospects, a reassessment of AI profitability, and extreme weather events could further weaken the outlook,” she added.

Countries and companies moved quickly to mitigate the oil price shock, drawing down reserves, substituting other suppliers and energy sources and cutting oil demand, Petya Koeva Brooks, the IMF’s deputy research ‌director, told Reuters in an interview. She said global growth would have fallen to ⁠2.5% this year without these measures, but their effect is fading as the war drags on.

The IMF noted a growing divergence between countries benefiting from AI and those bypassed by it. Just 32 countries now account for 95% of global growth, compared to 54 countries in April.

Downward growth revisions have become more widespread, with the IMF downgrading 47% of economies since the April forecasts were ⁠issued, including several energy importers outside AI value chains.

Hardest hit by downgrades were the Gulf countries directly impacted by the US-Israeli war against Iran, with Saudi Arabia’s GDP now forecast to contract 3.3% this year compared with the 1.7% growth predicted in July.