New Delhi, Jan 19 (UNI) The global economy is projected to remain resilient in 2026, with world growth expected to hold at 3.3 per cent, broadly in line with the estimated expansion in 2025, according to the International Monetary Fund’s World Economic Outlook update released on Monday.
Growth is forecast to ease marginally to 3.2 per cent in 2027, reflecting a balance between slowing momentum in traditional sectors and strong investment-led expansion in technology-driven industries.
The IMF noted that the steady global performance masks sharply divergent forces.
While shifting trade policies, elevated uncertainty, and geopolitical tensions continue to weigh on economic activity, these headwinds are being offset by strong investment in artificial intelligence and technology, accommodative financial conditions and continued fiscal and monetary support in several major economies.
Investment related to AI has been particularly strong in North America and parts of Asia, providing a significant boost to output and trade.
Global inflation is expected to continue its downward trajectory, declining from an estimated 4.1 per cent in 2025 to 3.8 per cent in 2026 and further to 3.4 per cent in 2027.
Inflation is projected to return to target levels more slowly in the United States than in other major economies, reflecting the gradual pass-through of higher tariffs and persistent cost pressures.
In contrast, inflation in most advanced economies is expected to converge toward target levels by 2027, supported by easing energy prices and moderating demand.
Trade conditions have shown signs of stabilisation since late 2025, although uncertainty remains elevated.
Recent tariff adjustments, including the removal of some US tariffs on agricultural products and a temporary truce in trade disputes involving key commodities, have prevented a further rise in global trade barriers.
However, the IMF cautioned that trade policy uncertainty remains significantly higher than pre-2025 levels, continuing to influence investment decisions and supply chains.
Financial conditions globally remain broadly accommodative despite pockets of volatility and rising sovereign bond yields.
Equity markets have been increasingly driven by a narrow group of large technology firms, while bond markets have seen a shift toward shorter maturities amid heavy sovereign issuance.
The IMF observed that global financial markets remain vulnerable to sudden corrections, particularly if expectations around AI-driven productivity gains weaken.
Growth performance remains uneven across regions. In advanced economies, growth is projected at 1.8 per cent in 2026 and 1.7 per cent in 2027.
The United States is expected to grow by 2.4 per cent in 2026, supported by fiscal stimulus and easing monetary policy, before moderating to 2.0 per cent in 2027.
Growth in the Euro area is projected to remain subdued at around 1.3 to 1.4 per cent, constrained by structural challenges, higher energy costs, and weaker manufacturing activity.
Japan’s growth is forecast to slow to 0.7 per cent in 2026 and 0.6 per cent in 2027 despite fiscal support.
Emerging markets and developing economies are expected to grow at just over 4 per cent in both 2026 and 2027.
China’s growth is projected at 4.5 per cent in 2026, supported by stimulus measures and a temporary easing of trade tensions, before slowing to 4.0 per cent in 2027 as structural headwinds intensify.
India’s growth outlook has been revised upward of 7.3 per cent in 2025, with growth expected to moderate to 6.4 per cent in 2026 and 2027 as temporary momentum fades.
Other regions are also set to see modest improvements. Growth in the Middle East and Central Asia is projected to accelerate to 3.9 per cent in 2026, supported by higher oil output and domestic demand.
Sub-Saharan Africa is expected to grow at 4.6 per cent, aided by macroeconomic stabilisation and reform efforts, while Latin America and the Caribbean are projected to see growth moderate in 2026 before rebounding in 2027.
World trade growth is forecast to slow from 4.1 per cent in 2025 to 2.6 per cent in 2026, reflecting the unwinding of front-loaded trade activity and the lingering impact of policy shifts.
Trade growth is expected to recover modestly to 3.1 per cent in 2027, supported by easing uncertainty and continued technology-related exports.
The IMF warned that risks to the global outlook remain tilted to the downside. A sharp correction in technology investment, renewed trade tensions, escalating geopolitical conflicts, or rising fiscal vulnerabilities could significantly disrupt growth.
Elevated public debt levels and increasing reliance on nonbank financing were highlighted as key sources of financial instability.
At the same time, the IMF noted that faster and broader adoption of artificial intelligence could provide a meaningful upside to growth if it translates into sustained productivity gains. The institution stressed that policies aimed at rebuilding fiscal buffers, preserving price and financial stability, reducing uncertainty, and accelerating structural reforms will be critical to sustaining growth and improving resilience in the years ahead.
