<figure id="attachment_2887932" aria-describedby="caption-attachment-2887932" style="width: 1600px" class="wp-caption aligncenter"><img loading="lazy" class="wp-image-2887932 size-full" src="https://media.freemalaysiatoday.com/wp-content/uploads/2024/10/b7a5feca-imf-270323.webp" alt="" width="1600" height="1000" /><figcaption id="caption-attachment-2887932" class="wp-caption-text">The IMF said the resilience seen so far has been driven largely by a few sectors, signalling underlying vulnerability. (AFP pic)</figcaption></figure>
WASHINGTON: The IMF upgraded its 2026 global growth forecast Monday, citing a boost from tech investments but warning that a reevaluation of AI productivity gains or renewed trade tensions could bring disruptions.
World economic growth is projected to hold steady at 3.3 percent this year, the IMF said, raising its forecast by 0.2 percentage points from October. This would be the same pace of growth as in 2025.
But the Washington-based lender cautioned in its World Economic Outlook update that &#8220;the resilience exhibited so far is driven largely by a few sectors,&#8221; signaling vulnerability.
While the global economy appears to be &#8220;shaking off the trade and tariff disruptions of 2025,&#8221; this does not mean they had no impact, said IMF chief economist Pierre-Olivier Gourinchas.
Instead, the challenges were offset by &#8220;tailwinds from the AI and tech investment boom,&#8221; he told reporters.
This was especially true in North America and Asia, the IMF said.
The private sector also showed adaptability in dealing with trade shocks, while fiscal and monetary support provided boosts.
Since returning to the White House last January, US President Donald Trump unleashed sweeping tariffs that hit allies and competitors alike, roiling financial markets and supply chains while causing trade tensions to rocket.
But temperatures have cooled over the year as the Trump administration struck tariff deals with several partners and crucially reached a temporary truce with the world&#8217;s second-biggest economy, China.
For now, global inflation is expected to drop from an estimated 4.1 percent in 2025 to 3.8 percent in 2026.
Heightened uncertainty
Nonetheless, the IMF said trade policy uncertainty remains much higher than in January 2025 and there could still be occasional flare-ups.
The US Supreme Court is also due to rule on the legality of Trump&#8217;s use of emergency economic powers to impose tariffs on goods from virtually all trading partners.
The high court is widely expected to deliver a decision in early 2026, the fund said.
The strikedown of some duties would &#8220;inject another dose of trade policy uncertainty into the global economy,&#8221; Gourinchas added.
One concern is how Trump could tap other legal authorities to reimpose tariffs. Another issue is how the court ruling would impact government revenues, and therefore fiscal policies, he added.
Besides trade, the AI boom pushing the global economy forward comes with its own risks, Gourinchas said.
He flagged the risk of a &#8220;market correction&#8221; if expectations about AI gains, productivity and profitability are not realized.
A major catalyst of recent Wall Street stock records has been bullish sentiment about artificial intelligence.
However, if growth due to AI turns out to be unrealistic, a big drop in the stock market &#8212; a correction &#8212; could damage the economy if consumers pull back.
Divergence
The pickup in tech investment and expenditure was estimated to add around 0.3 percentage points to average annualized US GDP growth in the first three quarters of 2025.
This offset a drag from the lengthy government shutdown late in the year.
Gourinchas noted the divergence between the United States &#8212; which is seeing a jump in AI tech investment &#8212; and other advanced economies.
The IMF estimates US growth at 2.4 percent this year, 0.3 percentage points higher than predicted in October.
In contrast, it expects euro area growth of 1.3 percent, and a slower pace in Japan.
Growth in China and India is also &#8220;relatively strong&#8221; compared with other emerging markets, Gourinchas said.
Most of the upward revision in global growth this time was accounted for by the United States and China, the IMF said.
Looking ahead, Gourinchas stressed the need for central bank independence, so that they can pursue their mandate of price stability and financial stability.
He did not comment on an ongoing US Justice Department probe into Federal Reserve Chair Jerome Powell.
But he noted that the importance of the US dollar for the international monetary system means it is &#8220;even more important&#8221; the Fed is able to do its job and do it well.

MatchPoint Times

IMF lifts 2026 global growth forecast but flags AI, trade risks

Global growth is forecast to hold at 3.3% this year, with the International Monetary Fund (IMF) raising its outlook by 0.2 percentage points from October.

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