The world economy is holding up better than many feared, but the International Monetary Fund says its resilience is under strain. In its October World Economic Outlook, released on Tuesday, October 13, during the IMF and World Bank annual meetings in Bangkok, the fund forecast global growth of 3.1% in 2026, a touch higher than its July estimate, and 3.4% in 2027.
The headline forecasts
- World: 3.1% in 2026, down from 3.5% in 2025; 3.4% in 2027.
- Advanced economies: 2.1% in 2026, slowing to 1.8% in 2027.
- Emerging and developing economies: 3.7% in 2026, rising to 4.4% in 2027.
- United States: 2.3% in both 2026 and 2027.
- Euro area: 1.1% in 2026 and 1.2% in 2027.
- China: 4.5% in 2026 and 4.0% in 2027.
- India: 7.4% in 2026 and 7.0% in 2027, still the fastest-growing major economy.
Inflation is going the wrong way
Global headline inflation is now expected to rise from 4.1% in 2025 to 4.7% this year before easing to 4.1% in 2027. In the US the fund sees inflation at 3.6% this year; in the euro area, 3.1%. The main reason is energy: the IMF assumes an average oil price of about $96 a barrel in 2026, reflecting the war-driven shock to supplies from the Middle East.
AI is the counterweight
IMF Managing Director Kristalina Georgieva told the meetings that rapidly growing investment in AI infrastructure, from data centres to chips and power networks, is one of the main reasons global growth remains close to 3%. Global trade volumes are forecast to grow 4.6% this year.
The risks
The report is titled “Resilience Under Strain, Urgent Choices,” and it warns that economic and policy buffers are becoming increasingly limited. The main risks it lists are:
- further disruption to energy supplies and prolonged conflicts;
- renewed trade tensions;
- high public debt and tighter financing conditions;
- a correction in AI-related investment if expected returns are reassessed, which could hit markets and spending.
What it means
For central banks, the combination of solid growth and rising inflation argues against quick rate cuts; the US Federal Reserve has already started raising rates. For households in import-dependent economies, including much of South Asia, energy and food prices remain the main pressure points. Governments, the IMF says, should rebuild fiscal buffers while protecting the most vulnerable.