Wednesday, 21 January 2026
The International Monetary Fund (IMF) has slightly upgraded its outlook for global economic growth, citing continued resilience in major economies despite trade frictions and elevated uncertainty. In its January 2026 update to the World Economic Outlook, the IMF now expects global real GDP to grow by 3.3% in 2026, an upward revision of 0.2 percentage points compared with its October 2025 forecast, while the projection for 2027 remains at 3.2%.
According to the IMF, the global economy continues to show an ability to absorb shocks, with stronger performance in the United States and China helping to offset weaker momentum elsewhere. The Fund noted that trade measures and policy uncertainty are likely to weigh on activity in the near term, but their impact is expected to gradually ease through 2026 and 2027. Investment linked to artificial intelligence, particularly in North America and parts of Asia, alongside supportive fiscal and monetary conditions, is seen as an important driver of growth.
Among advanced economies, growth for 2026 was revised up to 1.8%, while the outlook for 2027 remains unchanged at 1.7%. The IMF now expects the United States economy to expand by 2.4% in 2026 and 2.0% in 2027, reflecting stronger-than-expected activity in the second half of 2025 and a rebound following the end of the federal government shutdown. Growth in the euro area was also revised modestly higher for 2026, to 1.3%, with 2027 growth maintained at 1.4%, supported by public spending and relatively solid performance in countries such as Ireland and Spain, although structural challenges and high energy costs continue to weigh on manufacturing.
For emerging market and developing economies, the IMF forecasts growth of 4.2% in 2026 and 4.1% in 2027. China’s growth projection for 2026 was raised to 4.5%, supported by lower trade barriers following a temporary easing of trade tensions and ongoing policy stimulus, while growth is expected to slow to 4.0% in 2027 as longer-term constraints reassert themselves. India’s outlook for 2026 was also revised upward to 6.4%, reflecting stronger recent performance, with growth expected to stabilise at the same pace in 2027.
In the Middle East and North Africa, growth is projected to strengthen to 3.9% in 2026 and 4.0% in 2027, driven by higher oil output, domestic demand and continued reforms. Saudi Arabia’s growth forecast was revised upward to 4.5% in 2026 and 3.6% in 2027. The IMF based its oil price assumptions on futures data pointing to average prices of around USD 62 per barrel in both years.
Global trade growth, however, is expected to slow. The IMF forecasts world trade volumes to expand by 2.6% in 2026, down from 4.1% in 2025, before recovering to 3.1% in 2027. The moderation reflects adjustments in trade flows and earlier front-loading of activity in response to policy changes. Inflation is projected to continue easing globally, falling from 3.8% in 2026 to 2.4% in 2027, although price dynamics are expected to remain uneven across regions.
Despite the improved growth outlook, the IMF cautioned that risks remain tilted to the downside. It highlighted the possibility that productivity gains from AI may fall short of expectations, which could dampen investment and trigger financial market corrections. Renewed trade tensions, geopolitical conflicts or restrictions on key inputs could also disrupt supply chains and add to inflationary pressures, posing challenges for the global economy in the years ahead.
Source: kamcoinvest
