The IMF raised the UK's 2026 growth forecast to 1.3%, attributing the upgrade to increased AI investment. Global growth is projected at 3.1%, though risks from Middle East conflict and debt remain.
The International Monetary Fund (IMF) has upgraded its forecast for the United Kingdom's economic growth in 2026 to 1.3%, an increase of 0.3 percentage points from its July projection. The IMF attributed this improvement to larger investment in artificial intelligence (AI). This update was part of the IMF's October World Economic Outlook, released during annual meetings in Bangkok, Thailand.
The IMF forecasts global real GDP growth of 3.1% for 2026, a slight uptick from the 3.0% predicted in July. The fund stated that strong investment in AI infrastructure is offsetting the energy shock caused by the war in the Middle East. "The global economy has been resilient, but that resilience is under strain, with risks to growth tilted to the downside," said Silvana Tenreyro, the IMF's new chief economist.
The report highlights a divergence between countries benefiting from AI and those bypassed by it. Just 32 countries now account for 95% of global growth, compared to 54 countries in April. The IMF noted that the slight improvement in the global outlook is largely due to continued strong investment in AI infrastructure, prompting upgrades for key advanced economies building AI platforms and countries supplying AI hardware.
While the UK and other advanced economies saw upgrades, the outlook varies significantly by region. The IMF raised South Korea's growth forecast to 3.3%, a 0.7 percentage point increase from July, driven by robust semiconductor exports. Mexico's forecast was also raised to 1.5% due to stabilizing exports tied to AI supply chains.
Conversely, the IMF lowered its growth forecast for Latin America and the Caribbean to 2.3% for this year. Argentina saw the steepest downgrade, with its 2026 growth outlook cut from 3.5% to 2.1%. The IMF noted that most Latin American countries are seeing little benefit from the technology upcycle. "For most countries, there is little offsetting effect from the technology upcycle," the IMF stated.
Among other major economies, the IMF forecast US growth of 2.3% for both 2026 and 2027, unchanged for this year. Euro zone growth for 2026 was upgraded to 1.1% from 0.9% in July, citing stronger investment in AI and higher defense spending. China's growth forecast was trimmed to 4.5% for 2026, down 0.1 percentage point from July, as higher oil prices exacerbate weak domestic demand.
The IMF's baseline projections assume the Strait of Hormuz will reopen in March 2027, with a broad return to pre-war shipping conditions by October 2027. The fund assumes an average oil price of $96 per barrel for 2026 and $87 in 2027. However, the IMF warned that a prolonged conflict in the Middle East could put additional pressures on inflation and slow down growth.
The report also identified AI as a source of uncertainty. Under a scenario where productivity gains from AI fail to materialize, prompting a sharp decline in investment, US GDP could fall by 0.8% directly. This could cause spillovers to Asian technology exporters, with a total direct GDP impact of as much as 0.4% by 2028. The IMF urged governments to stop delaying action to rebuild fiscal buffers and articulate credible medium-term plans to bring debt back to sustainable levels.
The IMF's upgrade for the UK highlights the growing role of AI investment in driving economic performance among advanced economies. However, the report underscores a widening gap between nations integrated into AI supply chains and those left behind, while persistent geopolitical tensions and debt levels continue to pose significant risks to global stability.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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