The International Monetary Fund raised its 2026 global growth forecast to 3.1% on Tuesday 13 October, a 0.2-point upgrade from July, though growth will still slow from 3.5% in 2025, according to Euronews.
The upgrade rests on resilience in advanced economies and higher AI-related investment, the report says. The fund’s latest World Economic Outlook also warns that high energy prices linked to the US-Iran war pose significant risks, particularly for low-income countries excluded from the AI-driven investment boom.
Two Economies in One
Euronews reports that the IMF describes a split outlook, saying the war in Iran and the AI boom have together produced a fragmented world economy. Advanced economies are forecast to grow 2.1% in 2026, with those in the AI supply chain, such as Taiwan and South Korea, posting significantly higher figures. China’s growth is expected to slow by 0.5 points to 4.5%, mainly because of weak domestic demand. Global inflation is set to accelerate to 4.7% this year.
Euronews reports that prices of refined petroleum products remain 70% to 95% above pre-war levels, and describes the war, launched in February, as being in its eighth month. Energy-importing countries not exposed to the AI boom remain the most vulnerable, according to the fund.
Europe Under Pressure
Eurozone growth is forecast at 1.1% this year and 1.2% in 2027, with inflation at 3.1% in 2026 and 2.8% next year, well above the European Central Bank’s 2% target. The IMF said gas inventories remain below seasonal norms in parts of Europe, leaving the market vulnerable to adverse weather before winter.
Country forecasts diverge. Germany is expected to grow 1.3% and Spain 2.5%. France is seen expanding by just 0.4%, down from 0.9% in 2025, with unemployment rising to 8.4% from 7.7%. For Britain, the fund raised its 2026 forecast by 0.3 points to 1.3%, but expects growth to slow to 1.2% next year.
The Fund’s Advice
IMF Chief Economist Tenreyro called for urgent action by all countries in the face of downside risks. On fiscal policy, she urged governments to use only temporary and targeted measures to ease energy and other costs. Monetary policy, she said, should stay firmly focused on price stability, which Euronews says indicated that interest-rate rises to curb inflation were appropriate. The economy has been resilient, she said, but “that resilience is reaching its limits”. The report also says the fund warned that the technology tailwind could stop abruptly if expectations about AI-related profits and productivity gains are reassessed.
Why It Matters
A higher headline number masks a split: countries tied to the AI supply chain are gaining, while energy importers outside it face the sharper squeeze. The fund’s own warning is that a prolonged war could revive inflation and strain public finances. What to watch next is the path of energy prices into the European winter and whether AI-linked profit expectations hold.
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