The global economy is still expanding, but the foundations of that resilience are becoming narrower and more fragile. The International Monetary Fund’s October World Economic Outlook projects global growth of 3.1% in 2026, down from 3.5% in 2025, before a modest recovery to 3.4% in 2027. At the same time, headline inflation is expected to rise to 4.7% this year before easing to 4.1% next year.[1]
Those figures suggest neither a global boom nor an immediate recession. They point instead to an economy being held together by opposing forces: the Middle East war is raising energy and food costs, while investment linked to artificial intelligence is supporting demand, trade and financial markets. The result is an increasingly divided expansion in which some countries benefit from technology and favorable commodity prices while others absorb higher import bills.
Two shocks, moving in opposite directions
The IMF describes the conflict’s economic effect as a negative energy-supply shock. Higher energy prices raise production and transport costs, squeeze household purchasing power and complicate the task of central banks trying to bring inflation down. The institution’s managing director, Kristalina Georgieva, said the economy was resilient but that “this resilience is reaching its limits.”[2]
AI investment is providing the counterweight. Spending on computing infrastructure, software and related equipment has become a significant source of demand, particularly in economies that host technology companies or supply their hardware. The IMF says the technology cycle has helped sustain activity even as geopolitical and trade pressures weigh on conventional manufacturing.
That support, however, is concentrated. The fund warns that technology-related investment is concentrating risk among a relatively small number of firms, sectors and economies.[3] A boom led by a few companies can lift aggregate output without broadly improving wages, productivity or living standards. It can also make markets vulnerable if expectations about future AI profits prove excessive.
Why the headline growth rate conceals divergence
Energy importers outside the technology value chain face the most difficult combination: more expensive fuel, weaker external demand and limited fiscal room to cushion households. Lower-income countries are particularly exposed because food and energy occupy a larger share of household budgets, while higher borrowing costs make subsidies and public investment harder to sustain.
By contrast, technology exporters and countries benefiting from favorable terms of trade have more room to absorb the shock. This divergence helps explain why a global growth figure near 3% can coexist with acute pressure in individual economies. The IMF also reports that global imbalances increased to 0.7% of world GDP in 2025, underscoring the uneven distribution of demand and savings.[4]
Trade policy is adding another layer of uncertainty. The IMF expects world trade growth to slow in 2026 and remain constrained by tariffs, production-chain adjustments and geopolitical tensions.[5] Supporters of more restrictive trade measures argue that tariffs can protect strategic industries and reduce dependence on vulnerable suppliers. Critics counter that they raise costs, reduce efficiency and invite retaliation precisely when the global economy needs reliable access to energy, food and technology.
The central risk is policy exhaustion
Governments are entering this period with fewer buffers than they had after the pandemic. Higher interest rates have increased debt-service costs, while persistent inflation limits the scope for broad stimulus. Georgieva said yields in advanced economies had reached multi-decade highs, reflecting inflation concerns, fiscal pressures and expectations that AI could lift future growth.[2]
That leaves policymakers balancing competing priorities. Cutting rates too quickly could reignite inflation or amplify asset-market excesses; keeping them high for too long could weaken investment and worsen public finances. Targeted support for vulnerable households is less costly than universal subsidies, but it is politically harder to deliver.
What comes next
The baseline outlook depends on several favorable assumptions: that the conflict does not escalate further, that energy prices stabilize, that trade tensions remain manageable and that AI investment continues without a severe market correction. The IMF identifies each of those assumptions as a potential fault line. A reassessment of AI valuations could hit equity markets and business investment, while a wider conflict could produce another energy shock.
The more durable response is structural rather than purely monetary. The IMF calls for rebuilding fiscal space, improving energy security, expanding countries’ readiness to use AI and preserving cooperation in trade.[6] Those goals will not eliminate geopolitical risk, but they can determine whether the next shock becomes a temporary setback or a synchronized downturn.
The immediate lesson is that resilience should not be confused with safety. Growth is continuing, yet it relies increasingly on a narrow technology boom while war, inflation and debt erode the margin for error. The next stage of the global economy will depend less on whether AI can generate demand than on whether governments can spread its gains, contain its financial risks and rebuild the buffers needed when the next shock arrives.