IMF: AI investment bolsters growth outlook despite geopolitical headwinds

The IMF projects global growth of 3.1 per cent in 2026 and 3.4 per cent in 2027, with artificial intelligence-driven investments emerging as a key growth driver in advanced economies. The expansion of AI infrastructure and adoption across sectors has provided support to economic activity at a time when traditional growth engines show signs of moderation.

However, the fund cautioned that geopolitical tensions and regional conflicts continue to threaten the stability of this growth pathway. Armed conflicts in critical regions have created supply chain disruptions and elevated commodity prices, potentially dampening investment sentiment and consumer confidence.

Elevated government and corporate debt levels compound these concerns, limiting fiscal space for policymakers to respond to economic shocks. The IMF warned that without careful management of debt burdens, countries may face constrained policy options should downside risks materialise.

Regional variations in growth prospects underscore the uneven recovery across Asia-Pacific and other emerging markets. The fund advised policymakers to prioritise fiscal consolidation while supporting productive investments in technology and human capital to sustain medium-term growth momentum.