The International Monetary Fund (IMF) has warned that rising energy prices, higher borrowing costs and uncertainty surrounding the artificial intelligence boom are putting pressure on the global economy, leaving growth increasingly vulnerable to further shocks.
The Fund projects global economic growth at 3.1 per cent in 2026 before rising to 3.4 per cent in 2027, while global headline inflation is expected to reach 4.7 per cent this year before easing to 4.1 per cent next year.
Silvana Tenreyro, the IMF’s Economic Counsellor, Chief Economist and Director of the Research Department, presented the outlook during a press briefing on Tuesday, October 13, at the launch of the October 2026 World Economic Outlook, titled Resilience Under Strain, Urgent Choices, in Bangkok, Thailand.
“The global economy has been resilient, but that resilience is under strain, with risks tilted to the downside,” Tenreyro said.
She identified two major forces shaping the outlook: higher energy and commodity prices linked to the war, and increased investment and trade driven largely by artificial intelligence (AI).
The energy-price increase acts as a negative supply shock, raising production costs and restricting economic activity. In contrast, the AI boom is boosting demand, investment and trade, although both forces are adding to inflationary pressure.
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Tenreyro said global trade grew by 8.3 per cent cumulatively between 2023 and 2025, while trade in AI-related goods increased by 29 per cent over the same period.
“Without that global trade in AI-related products, the overall trade would have been only 4.6 per cent instead of 8.3 per cent,” she said.
However, the Fund warned that the benefits of AI investment could weaken if expected productivity gains fail to materialise or investors reassess the profitability of the technology.
AI supply chains are concentrated in a limited number of countries, sectors and companies, creating potential weak points that could disrupt production and trade.
A sharp fall in the market value of AI-related assets could also affect growth and financial stability.
Higher energy prices pose another risk, she said. stressing that global growth would have been 2.5 per cent this year, rather than the projected 3.1 per cent, without adjustments such as rerouting energy supplies, increasing production elsewhere, drawing on inventories and switching to alternative energy sources.
She warned that some of these measures were approaching their limits, leaving the world more exposed to prolonged supply disruptions.
The IMF also highlighted rising government debt and borrowing costs. Higher interest payments can leave governments with less money for essential services and reduce their ability to respond to future economic shocks.
The Fund urged heavily indebted countries to reduce budget deficits and put public debt on a downward path. It said any support for households affected by rising prices should be temporary and targeted at the most vulnerable.
Monetary policy, which involves central banks using interest rates and other tools to manage inflation, should remain focused on price stability, Tenreyro said. Central banks must prevent temporary price increases from becoming persistent inflation while accounting for the risk that tighter policy could weaken economic activity.
“The economy has been resilient, but that resilience is reaching its limits,” she said, calling on countries to rebuild fiscal capacity and strengthen their ability to withstand future supply shocks.
The outlook underscores the challenge facing governments and businesses as they contend with higher energy costs, tighter financial conditions and uncertainty over whether AI-driven investment will deliver lasting productivity gains.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X