IMF projects 3.1% global growth in 2026, warns of risks

KEY POINTS

• The IMF projects global economic growth of 3.1 per cent in 2026, down from 3.4 per cent in 2025.
• The Fund warns that conflict-related energy shocks, inflation and rising debt are putting pressure on economic resilience.
• Economies linked to artificial intelligence supply chains and unaffected energy exporters are performing relatively better, according to the IMF.
• The Fund urges governments to strengthen public finances and provide targeted support to vulnerable households.
• Georgieva warns that artificial intelligence also presents financial stability and cybersecurity risks.

MAIN STORY

The International Monetary Fund (IMF) has projected global economic growth of 3.1 per cent in 2026, below the 3.4 per cent recorded in 2025, while warning that persistent economic shocks, rising inflation and mounting debt pressures are testing the resilience of the global economy.

Speaking during the presentation of the Managing Director’s Global Policy Agenda at the IMF and World Bank Group Annual Meetings in Bangkok, Thailand, on Wednesday, October 14, IMF Managing Director Kristalina Georgieva said the outlook reflected competing pressures on economic activity.

The Fund’s projection remains unchanged from its April forecast, according to the information provided, but the expected slowdown reflects the impact of the conflict in the Middle East and increased demand associated with artificial intelligence (AI).

Georgieva said economies integrated into AI supply chains and energy-exporting countries not directly affected by the conflict were performing relatively better. Low-income economies and fragile, conflict-affected states face greater pressure, particularly where they depend on imported energy and have limited access to the benefits of the technology boom.

She also warned that rising bond yields in advanced economies were increasing borrowing costs for emerging and low-income countries, making debt servicing more expensive.

According to Georgieva, higher yields reflect several factors, including persistent inflation, investor demand, expectations of AI-driven growth and concerns about weak public finances. These pressures could further restrict the ability of governments to finance development and respond to economic shocks.

She said repeated crises had depleted fiscal and energy buffers in many countries, while some governments had failed to rebuild sufficient reserves following the COVID-19 pandemic.

Georgieva urged governments to strengthen public finances through better revenue collection, more disciplined spending and improved public financial management. She also called for temporary, targeted assistance to protect vulnerable households from higher food and energy prices, rather than policies that suppress market prices.

On monetary policy, she urged central banks to maintain their focus on price stability, noting that tighter monetary conditions could be necessary in countries where inflation remained above target.

The IMF managing director also highlighted risks associated with the rapid expansion of AI. While the technology could improve productivity and support prosperity, she warned that it could create financial stability vulnerabilities and increase cybersecurity threats.

She called on authorities to strengthen cyber resilience, particularly in critical systems such as financial infrastructure, and address excessive market concentration.

Georgieva further urged governments to improve the business environment, encourage competition, invest in digital and energy infrastructure and adopt active labour market policies. She said private-sector participation would be important in expanding AI adoption, creating jobs and ensuring that the benefits of technological change reached more people.

She added that the IMF had completed policy reforms intended to improve risk identification, strengthen surveillance, support achievable country-specific reforms and enhance debt sustainability assessments.

THE ISSUES

The IMF’s outlook highlights an uneven global economy in which the benefits of technological investment and energy exports are not distributed equally.

AI-related investment can stimulate demand and support economic activity, but countries without strong digital infrastructure, reliable electricity and the capacity to participate in technology supply chains may find it harder to benefit. At the same time, the Middle East conflict has created energy supply pressures that weigh on economies dependent on imported fuel.

Rising bond yields add another challenge. When borrowing costs increase, governments may have to devote more revenue to servicing existing debt, leaving less room for infrastructure, healthcare, education and social protection. The pressure can be particularly difficult for low-income countries with limited fiscal resources.

The IMF’s recommendation to use targeted support rather than suppress market prices also has implications for public spending. Broad energy subsidies can be expensive and may benefit higher-income consumers as well as vulnerable households. Targeted assistance can help governments direct limited resources towards those most affected, although its effectiveness depends on accurate beneficiary identification and efficient delivery.

AI presents a separate policy challenge. Its potential productivity gains could support growth, but greater reliance on digital systems also exposes businesses and financial institutions to cyberattacks and operational disruptions. The distribution of the gains will depend partly on investment, competition, infrastructure and workers’ ability to adapt to changing labour market demands.

For Nigeria, the global outlook matters through energy prices, foreign borrowing costs, investment flows and demand for exports. Higher international energy prices may benefit oil-exporting revenue, but they can also increase domestic fuel and transport costs. The net effect will depend on global market conditions and Nigeria’s own fiscal and economic policies.

WHAT’S BEING SAID

“Governments should urgently strengthen public finances through improved revenue mobilisation, rationalised spending and better public financial management,” Georgieva said.

“They should protect vulnerable citizens from rising food and energy prices through temporary, targeted assistance rather than suppressing market prices,” she said.

“AI-enabled cyberattacks can disrupt critical systems, including financial infrastructure, requiring authorities to strengthen cyber resilience and address excessive market concentration,” Georgieva said.

WHAT’S NEXT

Governments will be under pressure to rebuild fiscal buffers, improve revenue collection and manage spending as borrowing costs and economic uncertainty persist. Central banks will also need to assess inflation pressures when setting monetary policy.

The IMF is expected to continue working with member countries on policy surveillance, debt sustainability and reforms intended to strengthen economic resilience. The extent to which AI investment supports broader growth will depend on how effectively countries address infrastructure gaps, cybersecurity risks and labour market changes.

BOTTOM LINE

The IMF expects global growth to slow to 3.1 per cent in 2026 as energy shocks, inflation and debt pressures weigh on economic activity. It is urging governments to strengthen public finances, protect vulnerable households through targeted support and prepare for both the opportunities and risks associated with artificial intelligence.