The global economy is entering a more fragmented phase: artificial-intelligence investment is supporting demand just as war, trade tensions and elevated borrowing costs threaten to weaken it. The International Monetary Fund’s October outlook projects global growth of 3.1% in 2026 and 3.4% in 2027, but the headline figures conceal a widening gap between countries benefiting from the technology cycle and those exposed to energy, debt and trade shocks.
The central tension is visible in the IMF’s description of two opposing forces. A “negative energy supply shock” linked to the war in the Middle East is pushing costs higher, while a “positive AI demand shock” is driving investment and technology-related trade. IMF Managing Director Kristalina Georgieva said the global economy remained resilient, but warned that this resilience was “reaching its limits.” The IMF’s briefing presents the contest as more than a temporary fluctuation: it is a struggle between a concentrated productivity bet and increasingly broad geopolitical risks.
The AI boom is real—but uneven
Investment in computing infrastructure, software and data centres has become an important source of demand. The IMF says accelerated momentum in the global technology cycle, driven by advances in AI and adoption, is partly offsetting the effects of war. Countries hosting major technology firms, semiconductor production or energy-intensive data infrastructure stand to gain disproportionately.
That distribution matters. The IMF says countries benefiting from the AI investment boom or favourable terms of trade are performing relatively well, while many energy-importing and lower-income economies face more difficult conditions. Technology can raise productivity, but its initial gains tend to accrue to firms and countries with capital, specialised workers, reliable electricity and access to advanced computing. Without those foundations, AI may widen rather than close existing economic divides.
There is also a financial risk. Strong expectations about future AI profits have helped support investment and market valuations. If productivity improvements arrive more slowly than investors expect, a correction could reduce corporate spending and weaken confidence. The IMF has identified AI risks as two-sided: faster-than-expected productivity would be an upside, but excessive optimism could trigger financial-market losses. Its October World Economic Outlook also warns that renewed trade tensions remain a major threat.
War and trade are raising the cost of resilience
The energy shock complicates the policy response. Higher energy prices feed into transport, food and industrial costs, making inflation harder to contain. The IMF projects global headline inflation at 4.7% in 2026, easing to 4.1% in 2027. That decline is not guaranteed if conflict disrupts supply further or if governments respond with costly subsidies.
Trade tensions add another layer of pressure. Tariffs encourage companies to reroute supply chains and duplicate production, a process that may improve resilience but usually raises costs. The IMF expects world trade growth to slow in 2026 before stabilising in 2027, reflecting tariffs, production-chain adjustments and the continued strength of technology-related trade. The trade assessment suggests that the global economy is not simply deglobalising; it is reorganising around political trust, strategic industries and access to technology.
Supporters of tougher trade controls argue that this reorganisation is necessary. Governments want to protect critical supply chains, reduce dependence on geopolitical rivals and preserve domestic capacity in semiconductors, energy and defence. Critics counter that broad tariffs are an inefficient tool: they raise prices for consumers, invite retaliation and can leave smaller economies with fewer markets and higher input costs.
What comes next
The immediate test is whether AI investment can translate into broad productivity gains before higher energy costs and interest rates weaken demand. Advanced-economy bond yields have risen to multi-decade highs, according to the IMF, reflecting persistent inflation, fiscal concerns and expectations of stronger future growth linked to AI. Higher yields make it more expensive for governments to finance support measures and for businesses to expand.
Policy choices will therefore determine whether resilience becomes a durable recovery or a temporary reprieve. Governments can invest in skills, electricity grids and digital infrastructure so that AI benefits extend beyond a small group of firms. They can also target social support at households hit by energy inflation rather than relying on economy-wide subsidies. On trade, narrower and coordinated measures would limit collateral damage better than escalating blanket restrictions.
The next phase will reveal whether the AI boom is an engine of shared growth or a concentrated cushion against wider instability. The IMF’s forecast does not describe a world in recession, but it does describe one with less room for error: a geopolitical shock, an AI market correction or a renewed inflation surge could expose the weaknesses hidden by the aggregate growth rate.