IMF Boosts Global Growth Forecast on AI Boom, Tariff Easing

The International Monetary Fund (IMF) has raised its 2026 global growth forecast, citing a powerful artificial intelligence (AI) investment boom and the global economy's surprising resilience to US tariffs.

In its latest World Economic Outlook update, the IMF now projects global GDP will expand by 3.3% in 2026, an increase of 0.2 percentage points from its October estimate. The forecast for 2025 was also revised upward by 0.1 percentage point to 3.3%, while the 2027 projection holds steady at 3.2%.

These upward revisions mark a trend since July, reflecting a global economy that has successfully adapted to trade policy shifts, including tariff reductions that followed a peak in April 2025.

Global Economy Shakes Off Trade Tensions

IMF Chief Economist Pierre-Olivier Gourinchas highlighted the world economy's durability in the face of recent trade disruptions.

"We find that global growth remains quite resilient," Gourinchas told reporters. He explained that current forecasts for 2025 and 2026 now surpass predictions made in October 2024, before the second term of President Donald Trump.

"The global economy is shaking off the trade and tariff disruptions of 2025 and is coming out ahead of what we were expecting before it all started," he added.

According to the IMF, businesses have adapted by rerouting supply chains to navigate higher US tariffs. At the same time, new trade agreements have lowered some duties, and China has successfully shifted its exports toward non-US markets. The fund's latest forecast assumes an effective US tariff rate of 18.5%, a significant drop from the 25% estimated in April 2025.

AI Investment Fuels US and European Growth

A surge in AI-related investment is a primary driver of the upgraded outlook, particularly in the United States. The IMF raised its 2026 growth forecast for the US by 0.3 percentage points to 2.4%, driven by massive spending on data centers, advanced AI chips, and power infrastructure. The US forecast for 2027 was slightly lowered by 0.1 percentage point to 2.0%.

The technology investment boom is also boosting activity in Europe. Spain saw its 2026 GDP forecast upgraded by 0.3 percentage points to 2.3%. The IMF maintained its 2026 growth forecast for Britain at 1.3%.

The Double-Edged Sword of Artificial Intelligence

While AI investment is propelling growth, the IMF also flags it as a key risk. Gourinchas warned that if the breakneck pace of spending continues, it could fuel inflation. Conversely, if the anticipated productivity gains from AI fail to materialize, it could trigger a sharp correction in high market valuations, hurting demand.

Alongside geopolitical tensions and trade disputes, the AI boom is listed among downside risks. Gourinchas noted that a potential Supreme Court ruling against Trump's tariffs could "inject another dose of trade policy uncertainty into the global economy" if new tariffs are pursued under different laws.

However, the IMF also detailed the significant upside potential of AI. If the investment wave leads to rapid adoption and productivity gains, it could boost global growth substantially. The fund estimates this could lift global growth by:

• As much as 0.3 percentage points in 2026.

• Between 0.1 and 0.8 percentage points annually in the medium term, depending on adoption speed.

Forecasts for Major Economies: A Mixed Picture

China: The IMF upgraded China's 2026 growth forecast by 0.3 percentage points to 4.5%, following a stronger-than-expected 5.0% performance in 2025. This reflects a 10 percentage-point reduction in US tariffs on Chinese goods for one year and the continued diversion of exports to markets like Southeast Asia and Europe. Gourinchas cautioned that China risks facing protectionist policies unless it shifts its growth model from exports toward internal demand.

Eurozone: The region's 2026 growth forecast was edged up 0.1 percentage point to 1.3%, supported by increased public spending in Germany and strong performance in Spain and Ireland. The 2027 forecast remains unchanged at 1.4%, as planned increases in European defense spending are expected to materialize in later years.

Japan and Brazil: Japan received a slight upgrade to its 2026 growth forecast thanks to a new fiscal stimulus package. In contrast, Brazil's outlook worsened, with its 2026 growth forecast cut by 0.3 percentage points to 1.6%. IMF officials attributed this downgrade to tighter monetary policy needed to combat a recent inflation flare-up.

Inflation Eases, Paving Way for Policy Support

On a positive note, the IMF expects global inflation to continue its downward trend, falling from 4.1% in 2025 to 3.8% in 2026 and 3.4% in 2027.

According to Gourinchas, this cooling price environment creates room for more accommodative monetary policy from central banks, which will help sustain global economic growth.