Hajra Naz
The International Monetary Fund raised its 2026 global growth forecast on Monday, citing strong momentum from technology and AI-related investments, while cautioning that fresh trade tensions or a reassessment of AI’s productivity gains could still disrupt the outlook.
In its latest World Economic Outlook update, the IMF said global growth is expected to remain steady at 3.3 percent, an upward revision of 0.2 percentage points from its October forecast. That pace would match the growth recorded in 2025. However, the Washington-based lender warned that the apparent stability masks underlying fragility.
“The resilience exhibited so far is driven largely by a few sectors,” the IMF said, signaling that the global economy remains vulnerable to shocks.
IMF chief economist Pierre-Olivier Gourinchas said the world economy appears to be “shaking off the trade and tariff disruptions of 2025,” though he stressed that those disruptions were not without consequences.
Instead, the impact of trade tensions was offset by strong “tailwinds from the AI and tech investment boom,” Gourinchas told reporters, particularly in North America and parts of Asia. The IMF also noted that private-sector firms proved relatively adaptable in navigating trade shocks, while fiscal and monetary policy support helped stabilize growth.
Read More: 40% of Office Jobs Will Be Affected by Artificial Intelligence, Says IMF
Tariffs still loom
After returning to the White House in January last year, US President Donald Trump imposed sweeping tariffs on both allies and competitors, rattling financial markets and disrupting global supply chains. Trade tensions intensified sharply before easing later in the year, as the administration negotiated tariff agreements with several partners and reached a temporary truce with China, the world’s second-largest economy.
As a result, the IMF expects global inflation to ease from an estimated 4.1 percent in 2025 to 3.8 percent in 2026.
Still, new uncertainties have emerged. Trump’s recent tariff threats against eight European countries, tied to a dispute over the Danish territory of Greenland, have added fresh risk to the outlook.
“We see that we’re in this world in which trade tensions can erupt, geopolitical tensions can erupt,” Gourinchas said in an interview with AFP in Brussels. “And that’s a downside risk for the global economy.”
Elevated uncertainty
Despite some easing since last year, the IMF said trade policy uncertainty remains far higher than in early 2025, with the potential for sporadic flare-ups.
Adding to the uncertainty, the US Supreme Court is expected to rule in early 2026 on the legality of Trump’s use of emergency economic powers to impose tariffs on imports from nearly all trading partners.
If the court strikes down some of those duties, it would “inject another dose of trade policy uncertainty into the global economy,” Gourinchas said. He also warned that Trump could turn to alternative legal mechanisms to reimpose tariffs, while a ruling could affect government revenues and, by extension, fiscal policy.
AI optimism carries risks
Beyond trade, Gourinchas flagged risks tied to the very force helping prop up growth: artificial intelligence.
He warned of a potential “market correction” if expectations around AI-driven productivity, profitability, and long-term gains fail to materialize. Optimism about AI has been a major driver of recent record highs on Wall Street, but a sharp reassessment could have broader economic consequences.
“If growth from AI turns out to be overstated,” Gourinchas said, “a significant market correction could weigh on consumption and spill over into the wider economy.”
Read More: IMF Wants Sales Tax on Digital Platforms, Facebook, and E-Commerce
Growing divergence
The IMF estimates that increased tech investment added roughly 0.3 percentage points to average annualized US GDP growth during the first three quarters of 2025, offsetting the drag from a prolonged government shutdown later in the year.
Gourinchas highlighted a widening gap between the United States, which is experiencing a surge in AI investment, and other advanced economies. The IMF now forecasts US growth at 2.4 percent this year, 0.3 percentage points higher than previously expected. By comparison, growth in the euro area is projected at 1.3 percent, with an even slower pace in Japan.
For Pakistan, the IMF estimates economic growth of 3.2 percent in 2026. Growth in China and India remains “relatively strong” compared with other emerging markets, Gourinchas said.
The IMF noted that most of the upward revision to global growth this year was driven by stronger outlooks for the United States and China.
Central bank independence
Looking ahead, Gourinchas emphasized the importance of central bank independence, arguing that monetary authorities must be free to pursue price stability and safeguard financial systems.
He declined to comment on the ongoing US Justice Department probe involving Federal Reserve Chair Jerome Powell but stressed that the central role of the US dollar in the global financial system makes it “even more important” that the Federal Reserve can carry out its mandate effectively.
