Kristalina Georgieva, managing director ,International Monetary Fund.
Growth is increasingly concentrated, with 32 countries accounting for 95 percent of global growth, the report said. That compares with 54 countries as of April.
“The global economy is not simply slowing or accelerating; rather, growth is being reallocated across countries according to their exposure to the war-induced supply shock and AI-related demand strength,” it says.
Bangkok: The International Monetary Fund on Tuesday slightly upgraded its outlook for the world economy for this year, while warning of growing risks from rising debt, including the financial frenzy around artificial intelligence.
The IMF says it expects the global economy to grow at a 3.1 percent pace this year. That’s up from its July forecast for 3.0 percent growth and well below the 3.5 percent expansion in 2025. Growth in 2027 should rebound to 3.4 percent, it said in its latest Economic Outlook.
The report, released as world economic and financial leaders gathered in Bangkok for the fall meetings of the IMF and World Bank, predicts that growth in the United States will remain steady at 2.3 percent in 2026 and 2027.
Collectively, advanced economies will grow 2.1 percent this year, up from 2.0 percent in 2025, and then slow to 1.9 percent growth next year, it said.
The forecasts are based on a nearly 41 percent increase in oil prices this year, at an average of $96 a barrel. Global inflation is foreseen at 4.7 percent in 2026, falling to 4.1 percent next year. They also are based on the assumption that shipments of oil and gas through the Strait of Hormuz will resume by March, and that the boom in AI demand will moderate.
AI has uneven impacts
The artificial intelligence investment boom is helping keep global economic growth at around 3% in 2026 but could disrupt 40% of jobs worldwide, Reuters reported on Monday, citing International Monetary Fund managing director Kristalina Georgieva.
Georgieva described AI as a “slow-moving tsunami” that could reshape labour markets, education and government tax revenues as economic activity shifts from labour towards capital.
The IMF expects AI investment to boost growth in advanced Asian economies by 0.5 to 1 percentage point and in emerging Asian economies by 0.2 to 0.8 percentage point.
The investment boom is helping offset an energy supply shock that is weighing on the global economy, Georgieva said at the opening of the IMF and World Bank annual meetings in Bangkok, Reuters reported.
IMF research suggests AI could augment, downgrade or eliminate around 40% of jobs globally, with the proportion rising to 60% in advanced economies.
The shift could also undermine government tax revenues because taxation systems often rely heavily on income generated by workers rather than returns on capital.
Georgieva said an initial study found that 10% of jobs in the United States already required AI skills, while routine and repetitive roles were shrinking.
However, employment was increasing in some lower-paid sectors, including construction and data centres, highlighting the uneven effects of technology on the labour market.
The boom in artificial intelligence is offsetting damage from sharply higher prices for oil and gas, IMF economists say, but it also carries risks.
Its benefits are not shared equally: the U.S. and China account for more than three-quarters of net demand for imports of computer chips and other AI-related equipment, the report said.
“The outlook is highly uneven,” Silvana Tenreyro, the IMF’s director of research, told reporters in Bangkok.
Growth is increasingly concentrated, with 32 countries accounting for 95 percent of global growth, the report said. That compares with 54 countries as of April.
“The global economy is not simply slowing or accelerating; rather, growth is being reallocated across countries according to their exposure to the war-induced supply shock and AI-related demand strength,” it says.
Athanasios Vamvakidis, deputy director at the IMF’s Monetary and Capital Markets Department, said an AI-related correction in stock markets is just one of the risks. Rising bond yields are another evolving problem, along with cyberthreats that could disrupt financial systems, he said.
Underscoring such concerns, sell-offs of AI-related shares swept through Asia on Tuesday, with South Korea’s Kospi sinking as much as 7 percent before it closed 5.5 percent lower.
AI’s effects on employment are another worry, “a slow moving tsunami, but a tsunami nonetheless,” IMF Managing Director Kristalina Georgieva said.
“The impact over time on jobs globally we estimate to be around 40 percent — jobs either augmented or downgraded or eliminated. And we are already seeing some of this impact,” she said.
Debt remains a key concern for regional economies
The IMF chief is urging countries to do a better job of improving their national finances and taming mounting levels of debt.
That’s especially crucial at a time of high borrowing costs, Tenreyro said.
Countries that are somewhat insulated from the energy shocks of the Iran war and that are benefiting from rapid adoption of AI are managing to keep growth on track. But developing economies and emerging markets more vulnerable to higher costs for oil and gas will see growth slow to 3.7 percent this year from 4.5 percent in 2025, the report says. It forecasts they will regain momentum next year, expanding at a 4.4 percent annual pace.
The situation is much worse in the Middle East and Central Asia, where those regions’ economies are expected to contract this year before recovering to a 6.3 percent rate of growth in 2027.
The 21 European countries that share the euro currency are expected to grow by a meager 1.1 percent this year and 1.2 percent in 2027.
China, the world’s No. 2 economy, is expected to expand 4.5 percent this year, down from 5 percent in 2025, in line with the government’s official target.
India is once again forecast to be the world’s fastest-growing major economy, advancing at a 7 percent clip, down from a sizzling 7.7 percent last year.
The IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty. At the meetings in Bangkok, finance ministers and central bank governors will assess the state of the world economy and discuss strategies to support financial stability and sustained growth.
Middle East
The IMF has sharply cut growth forecasts for the Middle East and Central Asia in 2026, as the ongoing war has sent economies into a tailspin.
The IMF said the regional economy was projected to contract by 0.3 percent, compared to its projected 1.9 percent growth six months ago.
It cited “a longer closure of the Strait of Hormuz, compared with the baseline assumptions in the April” report, predicting a major rebound in 2027 based on the expected reopening of the waterway.
Since the Middle East war began in late February with US-Israeli strikes on Iran, Tehran has sought to impose its control over the Strait of Hormuz, repeatedly attacking ships that transit without its authorisation.
The United States has imposed its own counter-blockade on Iranian ports, and has escorted friendly ships through the waterway in increasing numbers.
According to the IMF, the countries most affected by shipping and production disruptions are Iraq, Kuwait, Qatar and Bahrain, all of which suffered damage to oil installations during the fighting.
They are “projected to experience double-digit contractions of their economies in 2026, followed by double-digit expansions in 2027 as production, exports, and logistics normalise”.
Saudi Arabia’s GDP is expected to contract by 3.3 percent this year, before rebounding to 7.9 percent growth next year, the global lender said.
The forecast was made before a series of deadly attacks on the Riyadh airport that began last week.
The fund noted that the kingdom the world’s largest crude exporter is among the least affected in the region, pointing to “an economy with more diversified export routes”.
AFP