IMF sees global growth rising but warns of AI-driven market risks

• US growth forecast increased to 2.4% in 2026 (up from 2.1%), with the euro area at 1.3% and China at 4.5%, supported by fiscal policy and lower interest rates
• AI-driven market momentum is concentrated in North America and Asia, but the IMF cautions this boom could trigger broader financial instability if productivity expectations are not met
• Trade protectionism and geopolitical tensions remain key risks that could reduce corporate profits, elevate prices, and disrupt cross-border supply chains

Summary: IMF Global Growth Forecast and AI-Related Risks

The International Monetary Fund (IMF) has upgraded its global economic growth forecast to 3.3% for 2026, up from the October estimate of 3.1%, citing increased business activity and surging investment in artificial intelligence technologies. The longer-term projection for 2027 remains at 3.2%.

Regional Forecasts:

• US economy: 2.4% growth in 2026 (previously 2.1%), slowing to 2% in 2027
• Eurozone: 1.3% growth expected
• China: 4.5% expansion projected

Key Drivers:

Rising AI investment, particularly in North America and Asia, has boosted market confidence and stock performance. Supportive US fiscal policy and anticipated interest rate reductions are contributing to the improved outlook.

Major Risks Identified:

The IMF warns that concentrated AI investment poses significant financial vulnerabilities. If expected productivity gains from AI fail to materialize, a sharp market correction could spread across sectors and erode household wealth. The report emphasizes that current market momentum may not be sustainable.

Additional Concerns:

• Trade tensions and protectionist policies could reduce corporate profits and maintain elevated prices
• Geopolitical uncertainties threaten investment decisions and supply chains
• Monetary policy uncertainty and shifting supply chains present ongoing challenges
• High tech sector exposure creates structural fragilities

The IMF acknowledges the global economy has shown resilience but urges caution, noting that underlying weaknesses—particularly in AI-exposed sectors—require careful policy monitoring. While AI offers economic promise, the report stresses that associated risks should not be underestimated, as sudden financial shocks could trigger broader instability.