Widening AI gap leaves just 32 countries generating 95% of global growth, IMF warns

The entire economic picture hinges on oil. In its baseline forecast, the IMF expects the Strait of Hormuz to be open again by March 2027; any delay or an escalation that pushes oil to $130 would weigh on growth and stoke inflation, forcing central banks to stay aggressive. The predicted oil prices — $96 a barrel this year and $87 next — confirm that a risk premium is now baked into crude. Exporters linked to artificial intelligence, including South Korea, supply chains around Taiwan, Mexico and Malaysia, are the main beneficiaries in the projections. But the IMF’s AI-unwind scenario underlines how vulnerable those same markets are if the profitability of AI is reassessed, a danger that is evident in the sharp decline in Asian tech stocks. Mounting public debt and rising borrowing costs also put pressure on bond markets that are already strained by high yields.

---

---

Artificial intelligence is propping up the global economy during the Iran war, according to the IMF, and the forecasts rely on both factors remaining broadly unchanged.

The report's key points in summary:

• The IMF lifted its 2026 global expansion projection to 3.1% from 3.0% in July, citing AI spending as a counterbalance to the energy disruption from the Middle East conflict. The 2027 forecast remains at 3.4%.
• The US economy is projected to grow 2.3% in 2026 and 2027. China's forecast has been lowered to 4.5% for 2026 and 4.0% for 2027. The euro area 2026 outlook was lifted to 1.1%. India's projection sticks at 7.0% for both years.
• Deep recessions are coming for Gulf economies. Saudi Arabia is expected to shrink by 3.3% this year, after July's prediction of 1.7% growth.
• The IMF sees headline inflation worldwide at 4.7% in 2026 and 4.1% in 2027. The forecasts rely on oil at $96 a barrel this year and $87 next.
• The baseline scenario counts on the Strait of Hormuz reopening in March 2027. If the conflict escalates and oil reaches $130, growth would fall and 2027 inflation would climb to 5.2%.
• A retreat from AI investment, along with a sharp drop in asset values, could leave global output 1.1% lower by 2028. US output would be 1.8% less.

The global economic growth outlook for this year was upgraded by the IMF, which cited robust AI investment as a counterweight to the energy disruption from the Middle East war, Reuters reported. The fund cautioned that risks lean toward the negative and that a smaller set of nations is fueling the expansion.

Released while finance leaders met in Bangkok for the IMF and World Bank annual meetings, the World Economic Outlook predicted 3.1% growth in 2026, an increase from 3.0% in July but below the 3.5% seen in 2025. The 2027 forecast was left at 3.4%. The IMF noted that the economy remains under pressure even with oil prices staying above $100 a barrel for an extended period. Deputy Research Director Petya Koeva Brooks told Reuters that without the measures taken by nations and businesses, global growth would have been only 2.5% this year, but added that the impact is wearing off as the conflict continues.

Artificial intelligence is the primary driver behind the better outlook. The upward revisions were concentrated in advanced economies creating AI platforms and, in particular, hardware suppliers such as South Korea, Malaysia, Mexico and Thailand. But the benefits are becoming more narrow: only 32 countries are behind 95% of global growth, fewer than the 54 counted in April. The IMF has cut forecasts for 47% of economies since its April projections, including many energy importers not part of AI supply networks.

The biggest impact is seen in the Gulf. The Saudi economy is now projected to contract by 3.3% this year, a sharp reversal from the 1.7% growth anticipated in July. Iraq, Kuwait and Qatar are expected to see declines of about 16%, and Iran and the United Arab Emirates are also forecast to enter recession.

In the major economies, the US is expected to grow 2.3% in both 2026 and 2027. The euro zone 2026 forecast was lifted to 1.1%, aided by AI investment and defence expenditure. China's projections were cut to 4.5% for 2026 and 4.0% for 2027, with oil prices curbing already weak domestic demand. India continues to be the quickest-growing large economy, with 7.0% projected for both years. Global headline inflation should come in at 4.7% in 2026 and 4.1% the year after.

Oil remains central to the projections. The IMF's baseline is that the Strait of Hormuz will be operational again by March 2027, with crude averaging $96 this year and $87 next. If oil were to hit $130 and stay there through early 2027, growth would suffer and 2027 inflation would rise to 5.2%. A sudden reversal in AI investment could lower global output by 1.1% by 2028.

The IMF also called on governments to restore fiscal buffers and lay out believable plans to return debt to sustainable levels, cautioning that high public debt heightens the danger of a sudden spike in borrowing costs.