The global economy is proving more resilient than many forecasters expected, but its resilience is increasingly dependent on forces that could also make the next downturn sharper. The International Monetary Fund’s October outlook projects global growth of 3.1% in 2026 and 3.4% in 2027, while warning that the expansion is becoming more uneven across countries. The IMF’s latest forecast identifies the artificial-intelligence investment boom, geopolitical conflict and fiscal vulnerability as central forces shaping the outlook.
The immediate pressure comes from the Middle East conflict and its effect on energy markets. The IMF expects the Middle East and Central Asia economy to contract by 0.3% in 2026, a steep reversal from the 1.9% expansion it had projected in April. Regional projections reported by Al Jazeera show particularly severe risks for energy-producing economies if fighting disrupts infrastructure, transport or exports.
Energy is the first transmission channel
Higher oil and gas prices act like a tax on consumers and businesses. Energy-importing countries face costlier transport, electricity and industrial inputs, while central banks confront a difficult choice: tolerate renewed inflation or keep interest rates higher for longer. Lower-income economies are especially exposed because energy and food account for a larger share of household spending.
The shock is not limited to the region. The OECD’s September interim outlook projects global growth of 2.9% in 2026 and 3.0% in 2027, below its earlier expectations after the conflict in the Middle East. The OECD report warns that prolonged disruption would weaken trade, investment and household purchasing power.
There is, however, a counterargument. Energy exporters can receive a short-term revenue boost from higher prices, and governments may cushion consumers through subsidies or tax relief. Such measures can prevent an immediate collapse in demand, but they also increase fiscal pressure and may delay adjustment to more efficient energy use.
AI is supporting growth—and concentrating risk
The second force is the AI investment boom. Spending on data centers, semiconductors, electricity generation and specialized software has become an important source of demand in the United States and other technology-intensive economies. The IMF says countries benefiting from AI investment or favorable terms of trade are performing relatively well, while energy importers and poorer economies face more difficult conditions.
The gains are not guaranteed. The IMF has warned that expectations for AI could prove too optimistic, producing a correction in financial markets. The concentration of investment and equity-market performance in a small group of technology companies also creates vulnerability: if productivity gains arrive slowly, valuations and corporate spending could fall together. Analysis from the Atlantic Council describes AI demand as one of three simultaneous global shocks.
Supporters of the boom argue that the technology could eventually raise productivity, offset labor shortages and improve public services. Critics counter that the benefits may be concentrated among large firms and highly skilled workers, while electricity demand, labor disruption and market concentration impose wider costs. The evidence remains incomplete because investment has accelerated faster than measurable economy-wide productivity gains.
Debt limits governments’ room to respond
The third pressure is public debt. Governments used large-scale spending to protect households during the pandemic, support energy consumers and sustain demand. Now they must finance higher interest costs while responding to war, climate risks and the infrastructure needs of the AI economy.
That creates competition for savings. Governments and technology companies are both seeking long-term capital, pushing up borrowing costs and making it harder for heavily indebted states to invest. France is among the countries facing particular strain from political uncertainty, budget deficits and rising bond yields, according to recent Economist reporting.
The next phase will depend less on a single headline growth number than on whether these pressures reinforce one another. A prolonged war could intensify inflation, forcing central banks to restrict demand just as debt-service costs rise. A successful AI investment cycle could lift productivity and tax revenues, but a market correction would expose governments and companies that borrowed against optimistic assumptions.
Policy choices will therefore determine who absorbs the adjustment. Targeted support for vulnerable households is less inflationary than broad subsidies; credible medium-term budget plans can reduce borrowing costs; and investment in grids, education and digital infrastructure could spread AI’s benefits beyond a narrow group of firms. Without those measures, the global economy may continue growing while becoming more unequal, more financially fragile and more exposed to the next shock.