E-Paper
IMF flags risks of AI bubble to rising global growth outlook for 2026
The IMF raised global growth projections with inflation expected to drop. Risks include technology reassessment and geopolitics affecting financial stability.
The International Monetary Fund issued a warning over concerns about an artificial intelligence bubble while trade and geopolitical tensions remain a dawning risk to the world economy.
While it issued the warning, it also raised its outlook for global growth in 2026. The lender aims global growth of 3.3% this year, which slightly shot up from the 3.1% predicted in October, according to the World Economic Outlook report, that was published on Monday.
The estimate for 2027 was unchanged at 3.2%.
The IMF said that global inflation would fall, but the US inflation would gradually return to target, adding that the key downside risks include reevaluation of technology expectations and escalation of geopolitical tensions.
Technology-driven momentum would moderate down but still provide offset to lower immigration and moderating consumption, IMF predicted.
“Policymakers should restore fiscal buffers, preserve price and financial stability, reduce uncertainty, and implement structural reforms,” the report read.
The artificial intelligence bubble
Citing it as a support system behind keeping the world economy steady and also a challenge if it reverses, the IMF stresses on two factors, an AI boom that’s fueling the stock market and a relative easing in trade tensions.
In the latest report, while the IMF underlined the surge in expenses on artificial intelligence, particularly in North America and Asia, calling it a ‘growth driver’, it noted that if the hoped-for productivity gains from the new technology don’t pan out, it could trigger an “abrupt” slump in markets that could spread to other sectors and erode household wealth.
“Global growth has been impressively resilient amid trade disruptions, but this masks underlying fragilities tied to the concentration of investment in the tech sector,” IMF's Chief economist, Pierre-Olivier Gourinchas and Financial Counsellor Tobias Adrian said in a recent blog post.
“AI-driven investment offers transformative potential—but also introduces financial and structural risks that demand vigilance,” they added.
Geopolitical strains
Noting on the impact from tariffs, the IMF predicted that its aftereffects would tone down in 2026 and 2027.
The lender did not rule out a possibility of eruption of new trade disputes with more countries adopting a “protectionist posture.”
“That could result in lower profit margins for companies and prolonged price pressures,” the report said.
