IMF raises 2026 growth outlook, sees Pakistan economy expanding 3.2%

The International Monetary Fund raised its global economic growth forecast for 2026 on Tuesday, citing continued investment in technology and artificial intelligence, while warning that trade tensions and overly optimistic expectations for AI could pose risks to the outlook.

The IMF said it now expects the global economy to grow by 3.3% in 2026, up 0.2 percentage points from its October projection.

Pakistan’s economy is forecast to expand by 3.2% next year, placing it among emerging markets expected to post steady growth.

IMF Chief Economist Pierre-Olivier Gourinchas said global growth is being supported by technology and AI investment, particularly in North America and Asia.

He cautioned, however, that economic resilience remains concentrated in a limited number of sectors, leaving many economies vulnerable to shocks from trade disruptions or weaker-than-expected productivity gains from AI.

The Fund said adaptability in the private sector, along with fiscal and monetary support, helped cushion the lingering effects of trade tensions in 2025, including U.S. tariffs that affected multiple economies.

It also pointed to new sources of uncertainty, including recent tariff threats by U.S. President Donald Trump against eight European countries over Greenland and a pending U.S. Supreme Court ruling on the legality of earlier emergency tariffs.

The IMF said those developments could increase global trade risks.

The IMF warned that excessive optimism about AI-driven growth could lead to a market correction if expectations are not met, potentially slowing economic momentum if consumer spending weakens.

Regionally, the IMF forecasts U.S. economic growth at 2.4% in 2026, 0.3 percentage points higher than its October estimate.

Growth in the euro area is projected at 1.3%, while Japan is expected to expand at a slower pace. China and India are forecast to maintain relatively strong growth next year.

Gourinchas said most of the upward revision to the global outlook reflects stronger-than-expected performance in the United States and China.

He also stressed the importance of central bank independence, particularly for the U.S. Federal Reserve, in safeguarding price stability and financial markets.