The global economy is slowing, but not in the way many forecasters expected. An artificial-intelligence investment boom is helping offset the damage from sharply higher energy prices linked to the war in the Middle East, prompting the International Monetary Fund to raise its 2026 growth forecast while warning that the expansion is becoming more fragile.
In its October World Economic Outlook, the IMF projected global growth of 3.1% in 2026, up from its July estimate of 3.0% but below the 3.5% recorded in 2025. Growth is expected to accelerate to 3.4% in 2027, while global headline inflation is forecast to rise to 4.7% this year before easing to 4.1% next year. The headline numbers suggest resilience. The underlying story is more precarious: two powerful shocks are pulling the world economy in opposite directions.
Two shocks, one fragile balance
The first is a negative supply shock. The IMF says the conflict has pushed up energy and other commodity prices, raising production and transport costs while squeezing household purchasing power. Its projections assume oil prices average $96 a barrel in 2026 and that oil and gas shipments through the Strait of Hormuz resume by March—an assumption that leaves the forecast exposed to further escalation.
The second is a positive demand shock from AI. Spending on data centres, semiconductors, cloud infrastructure and related equipment is supporting trade and investment, particularly in economies positioned at the centre of the technology supply chain. The IMF has described AI as an important reason the world economy is growing faster than its earlier forecast suggested.
“Resilience is reaching its limits,” IMF Managing Director Kristalina Georgieva said at the institution’s annual meetings.
That contrast explains why the current outlook is neither a straightforward recovery nor a conventional downturn. Energy costs are weakening consumers and import-dependent economies, while technology investment is lifting corporate spending and activity in a narrower group of countries and industries.
Who benefits—and who is left behind?
The gains from the AI boom are uneven. Economies hosting major technology companies, advanced chip production, data-centre capacity or abundant electricity can capture investment, tax revenue and higher-skilled employment. Countries with favourable terms of trade may also benefit from stronger demand for commodities.
But the IMF cautions that many energy-importing and lower-income economies face a tougher combination of expensive fuel, tighter financial conditions and limited fiscal space. Higher food and energy prices can force governments to redirect budgets toward subsidies or emergency relief, leaving less money for infrastructure, education and climate adaptation.
This distributional divide also complicates monetary policy. Central banks must contain inflation without choking off investment. If energy prices remain high, interest-rate cuts may be delayed; if policymakers keep borrowing costs elevated, heavily indebted governments and businesses may face rising repayment burdens. The result could be slower investment outside the AI sector, even as technology companies continue to attract capital.
The concentration problem
AI is supporting growth, but its concentration creates a potential fault line. The IMF says AI-related supply chains are clustered in a small number of countries, sectors and firms. That creates chokepoints in advanced chips, specialised equipment, cloud computing and electricity supply.
Optimists argue that this concentration may be temporary. Faster productivity growth could eventually spread beyond the firms building the infrastructure, reducing costs and raising output across manufacturing, services and public administration. If that happens, the current investment surge could become a broader economic transformation rather than a narrow asset boom.
Sceptics point to the opposite risk: expectations may outrun actual profits. The IMF warns that a reassessment of AI prospects could trigger financial-market corrections. A pullback in technology spending would hit not only chipmakers and data-centre developers but also economies whose recent growth has become dependent on exports and corporate investment tied to AI.
What comes next
The immediate test is whether energy disruption intensifies or begins to fade. The IMF’s relatively benign 2027 forecast depends partly on easing commodity pressures and a moderation of AI demand. A prolonged conflict would challenge both assumptions by keeping inflation high and reducing household and business spending.
Governments therefore face a narrow policy path. They must protect vulnerable households without locking in permanent subsidies, preserve investment in productive capacity, and avoid fiscal policies that push borrowing costs still higher. International cooperation on trade, energy security and technology supply chains could reduce the risk that one geopolitical shock becomes a global financial shock.
The central question is not whether AI can support growth. It already is. The question is whether that support becomes broad-based productivity—or remains a concentrated boom carrying more of the global economy than it can safely bear.