The IMF raised its 2026 global growth forecast to 3.1 percent from 3.0 percent in July, a marginal upgrade that leaves the world economy expanding more slowly than the 3.5 percent recorded in 2025. The revision, published as finance leaders convene in Bangkok for the annual meetings, reflects sustained spending on AI infrastructure that has propped up advanced economies and a handful of hardware suppliers. But the fund warned that the resilience built since the energy shock is fading, and that the conflict spreading across the Gulf is rewriting the outlook for major energy producers.

AI spending narrows the growth club

Only 32 countries are now expected to generate 95 percent of global growth this year, down from 54 in the April outlook. The concentration reflects a divide the fund has been tracking for months: economies plugged into AI supply chains, South Korea, Malaysia, Mexico and the meeting host Thailand, are outperforming, while 47 percent of economies have seen forecasts downgraded since April. The gap is no longer cyclical; it is structural, driven by where capital flows for data centres and semiconductor fabrication.

Gulf projections collapse on war assumptions

The sharpest revisions sit in the Gulf, where the IMF now models a US-Israeli war against Iran that disrupts energy production across the region. Saudi Arabia is forecast to contract 3.3 percent in 2026, a five-percentage-point swing from the 1.7 percent growth projected in July. Iran faces a 7.6 percent contraction. Iraq and Kuwait are each projected to shrink 16 percent, Qatar 15.6 percent, and the United Arab Emirates 3.9 percent. The fund cautioned that a prolonged conflict could push inflation higher and disrupt supplies well beyond the region.

Advanced economies hold steady, China slows

The United States kept its 2026 forecast at 2.3 percent, with 2027 nudged up 0.1 percentage point on private consumption, tax cuts and AI investment, though the high import content of that spending may limit the domestic boost. The eurozone was upgraded to 1.1 percent from 0.9 percent in July, helped by AI-related investment, supply-chain participation and higher defence outlays across the EU. Britain rose 0.3 percentage points to 1.3 percent on similar AI-driven investment. China slipped 0.1 percentage point to 4.5 percent for 2026 and 4.0 percent for 2027 as higher oil prices compound weak domestic demand, offset partly by strong exports.

India stays ahead but the ceiling is lower

India remains the fastest-growing major economy at 7.0 percent in both 2026 and 2027, unchanged from July. The consistency is notable, but the global ceiling is dropping: the 2027 world forecast sits at 3.4 percent, unchanged from July but only 0.2 percentage points above the April scenario. Deputy research director Petya Koeva Brooks told Reuters that without the reserves, diversification and demand destruction deployed since the energy shock began, growth this year could have fallen to 2.5 percent. Those buffers are now thinning.