The global economy has remained stronger than expected in the first half of 2026, but the International Monetary Fund (IMF) says that performance is becoming more uneven and the room to absorb further shocks is narrowing rapidly.
The Fund said activity had held up despite the continuing war in the Middle East and ongoing trade tensions. Strong investment in artificial intelligence (AI) has also supported demand, creating a technology-led boost that has benefited some economies more than others.
The combination of geopolitics and technology has divided the global outlook. Countries with favourable terms of trade, or substantial technology-related exports and investment, have gained some protection. Others are facing higher import costs and weaker demand.
The IMF said economies had so far limited the damage from the war by using financial buffers and adapting quickly. Flexible supply chains, redirected shipments, reduced inventories, fiscal support and lower energy intensity than in previous decades had helped contain the impact on activity.
Private companies have also continued to respond to repeated shocks, including geopolitical risks and changes in trade policy, while financial markets have maintained a broadly calm assessment of the challenges. The IMF said that confidence had also been supported by strong enthusiasm in the technology sector.
However, the Fund warned that these adjustment mechanisms cannot be relied upon indefinitely. Inventories have already been reduced, commodity markets remain exposed to disruption and greater fragmentation could reduce efficiency. Prolonged uncertainty may eventually weaken confidence, while energy constraints could undermine the AI-led growth impulse.
Financing conditions could also change suddenly, including because of concerns about fiscal sustainability.
“Global growth is projected at 3.1 percent in 2026 and 3.4 percent in 2027, unchanged for 2026 and revised moderately upward for 2027, relative to the projections in the April 2026 World Economic Outlook (WEO). Global headline inflation is projected to increase to 4.7 percent in 2026 before easing to 4.1 percent in 2027, marking a cumulative upward revision of 0.7 percentage point with the temporary increase driven mainly by energy and food prices,” it said.
The stable global headline figures conceal a significant shift in where growth is being generated. Economies with limited exposure to the conflict and strong links to the technology expansion are seeing activity remain firm or improve. Energy exporters outside the immediate conflict zone are also benefiting from favourable terms of trade.
Energy-importing countries with little involvement in technology supply chains face a more difficult combination of pressures. They are dealing with higher import bills, exchange-rate pressures, weaker real incomes and tighter public finances, without equivalent sources of additional demand.
Many low-income and vulnerable countries fall into that group, raising the prospect that recent shocks will widen income differences both between and within nations.
World trade growth is expected to slow in 2026 before stabilising in 2027, reflecting tariffs, changes to production chains and continued strength in technology-related trade. Large fiscal deficits, limited domestic rebalancing, technology-driven capital flows and differing patterns of demand are expected to keep global imbalances only modestly lower over the medium term.
The IMF said the medium-term growth outlook remained weak by historical standards and varied widely between countries, partly because of differences in AI readiness and the resilience of energy systems.
Risks remain tilted to the downside. A prolonged stalemate or further escalation in the Middle East could keep energy and food prices high and volatile, revive inflation, weaken fiscal and external positions and reduce growth. Damage to energy infrastructure, cyberattacks and extreme weather could intensify those effects.
The IMF also warned that a reassessment of AI’s profitability and productivity potential could reduce investment sharply, cause falls in equity markets and tighten financial conditions, affecting economies integrated into technology supply chains and those with significant technology-stock holdings.
