The IMF has nudged up its global growth forecast for 2026, citing unexpected resilience in the world economy. Trade disruption remains a drag, but investment and policy support are helping offset the risks…reports Asian Lite News
The world economy is expected to grow slightly faster than previously thought in 2026 after the International Monetary Fund upgraded its forecast, pointing to resilience in activity despite trade disruption and policy uncertainty. In an update to its World Economic Outlook released on Monday, the International Monetary Fund said global growth is now projected at 3.3 per cent in 2026, an increase of 0.2 percentage points from its October 2025 estimate, while its outlook for 2027 was left unchanged at 3.2 per cent.
The upgrade reflects what the Fund described as a global economy that has so far weathered headwinds better than expected. Although trade policy uncertainty and disruptions continue to weigh on confidence and investment in some regions, these effects are being offset by a combination of strong technology-related investment, supportive fiscal and monetary policies, broadly accommodative financial conditions and the adaptability of the private sector.
The IMF said surging investment linked to technological change has become a significant source of momentum, helping to cushion the impact of trade frictions. Governments in several major economies are also maintaining fiscal support, while central banks, having made progress in bringing down inflation, are in a position to avoid tightening financial conditions further. Together, these factors have helped keep growth on track even as geopolitical tensions and protectionist pressures persist.
The updated projections underline a familiar but widening gap between advanced economies and the rest of the world. Growth in advanced economies is forecast at 1.8 per cent in 2026, easing slightly to 1.7 per cent in 2027. By contrast, emerging market and developing economies are expected to expand by 4.2 per cent in 2026 and 4.1 per cent the following year, continuing to account for the bulk of global growth.
Within advanced economies, the outlook remains mixed. Some countries are benefiting from strong labour markets, easing inflation and robust investment in digital and green technologies. Others continue to struggle with weak productivity growth, ageing populations and the lingering effects of tighter financial conditions following the inflation shock of recent years. The IMF did not change its overall assessment that growth prospects in many advanced economies remain subdued by historical standards.
For emerging markets and developing economies, the projections suggest continued resilience, although risks remain unevenly distributed. Strong domestic demand and investment are supporting growth in several large emerging economies, while others face challenges from high debt levels, exposure to volatile capital flows and sensitivity to global financial conditions. The IMF’s forecasts assume that financial conditions remain broadly supportive and that no major new shocks materialise.
Inflation trends are a key part of the outlook. The IMF said global inflation is expected to continue easing over the forecast horizon. Global headline inflation is projected to slow from an estimated 4.1 per cent in 2025 to 3.8 per cent in 2026 and 3.4 per cent in 2027. This gradual decline reflects the fading of earlier supply shocks, tighter monetary policy working through economies, and improved balance between supply and demand in many markets.
The easing inflation outlook has important implications for policymakers. With price pressures receding, central banks may have greater flexibility to support growth if needed, although the IMF has repeatedly warned against easing policy prematurely. Fiscal policy, meanwhile, is expected to remain supportive in many countries, particularly where governments are investing heavily in infrastructure, technology and the energy transition.
Despite the modest upgrade, the IMF stressed that the outlook remains subject to significant uncertainty. Trade policy tensions continue to pose a risk, particularly if existing measures are expanded or new restrictions are introduced. Geopolitical conflicts could disrupt energy and commodity markets, while financial markets remain vulnerable to sudden shifts in sentiment. High levels of public and private debt in many economies also limit the room for policy manoeuvre if conditions deteriorate.
At the same time, the Fund pointed to upside risks if investment related to technology and productivity accelerates more quickly than expected. Advances in areas such as artificial intelligence and automation could lift potential growth, particularly if accompanied by reforms that encourage competition and labour market participation.
