IMF warns global economy nearing "limits of resilience"
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The IMF and World Bank annual meetings in Bangkok, Thailand, on Monday. Photo: Matt Hunt/Anadolu via Getty Images
The global economy's ability to withstand new shocks is coming under strain, the International Monetary Fund warned Monday night in its latest economic forecast.
Why it matters: Worldwide growth has defied expectations, holding up despite the Middle East war and soaring oil prices. But some policymakers fear that dwindling energy reserves, mounting debt and growing reliance on the AI boom leave the world increasingly vulnerable.
What they're saying: "Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience," IMF economic counselor Silvana Tenreyro wrote in a blog post.
- "Technology-related investment, while an important boon against the energy shock, is concentrating risks — making the global expansion heavily reliant on a small number of firms, sectors, and economies," she added.
The intrigue: The AI boom has helped offset the war's economic toll, but a sharp reversal could leave global GDP 1.1% below the IMF's baseline forecast by 2028, with a bigger hit of 1.8% to U.S. GDP.
- That scenario assumes AI's promised productivity gains fail to materialize, triggering a pullback in investment and a financial market correction.
- Continued AI investment could also fuel inflation, potentially prompting further interest rate hikes.
- But a stronger AI investment boom — paired with faster productivity gains — could lift global GDP 0.6% above its baseline forecast by 2029.
By the numbers: The IMF largely maintained its global growth outlook despite prolonged energy disruptions from the Middle East war. But it now expects higher inflation this year and next.
- The IMF projects global growth of 3.1% in 2026 — unchanged from its April forecasts — and 3.4% in 2027, up 0.2 percentage points.
- The fund expects the U.S. economy to grow 2.3% in both years, the fastest among G7 economies. The 2027 estimate was revised up 0.2 percentage points.
- Global inflation is expected to reach 4.7% in 2026 and ease to 4.1% in 2027, with both forecasts revised up from April as higher energy and food prices take a toll.
Zoom in: The world has weathered the energy shock partly by drawing down oil reserves and redirecting supplies.
- Global oil stocks are being depleted by roughly 2.7 million barrels a day, the IMF says, raising the risk of a sharp price spike.
What to watch: The forecasts set the backdrop for the global finance officials and central bankers gathering in Bangkok this week for the IMF and World Bank's annual meetings.
The bottom line: The IMF has underestimated global growth for three consecutive years, raising questions about whether economies have become better at weathering shocks.
- But that resilience is no guarantee against the next crisis.
