IMF projects stronger 3% global growth for 2026, warns risks remain

September 02, 2026 (MLN): The global economic outlook for 2026 has strengthened to around 3%, but the world remains vulnerable to an unfinished energy shock, historically high public debt, stalled disinflation and uncertainty over the economic and financial effects of artificial intelligence.

The International Monetary Fund (IMF) Managing Director Kristalina Georgieva made these remarks while addressing a meeting of G20 finance ministers and central bank governors in Asheville, North Carolina, where she said policymakers broadly agreed on the need to lift potential growth as the global economy faces repeated shocks and heightened uncertainty.

She stressed that structural reforms and sound fiscal and monetary policies were essential to creating the foundation for stronger and better-balanced global growth, adding that international cooperation remained critical in helping countries manage debt problems, contain cross-border spillovers and address widening global imbalances.

Kristalina Georgieva said the global economy had absorbed the impact of the energy supply shock better than initially expected, helped by the use of strategic oil and gas reserves, alternative energy sources and demand-management measures.

She noted that investment related to artificial intelligence had also supported economic activity, particularly in the United States, with spending on power infrastructure needed to meet AI-related energy demand emerging as an additional source of growth, while economies integrated into the AI supply chain, including South Korea, had also benefited.

However, she cautioned that global averages masked significant differences among countries and that risks to the outlook remained elevated, saying the energy shock is not over, since the Strait of Hormuz remained largely closed, strategic reserves would eventually need replenishing, and AI was increasing global energy demand as the Northern Hemisphere approached winter.

The IMF chief also flagged the growing burden of public debt, which she said had reached almost 100% of global GDP, exceeding levels seen after World War II and continuing to rise.

She likened the global debt trajectory to a staircase, with debt jumping sharply during major shocks and experiencing little or no reduction afterward.

On inflation, Kristalina Georgieva said disinflation had stalled in many countries, while mounting fiscal pressures were pushing core government bond yields higher and deepening investor concerns about the interaction between fiscal and monetary policy.

She added that the longer-term effects of AI on productivity and financial stability remained uncertain.

Kristalina Georgieva said central banks should stay focused on their price stability mandates, while governments needed credible medium-term fiscal consolidation plans, with structural reforms centred on reducing bureaucracy and removing domestic barriers that restrict growth.

She observed that stronger potential growth would help address the fiscal problem, and addressing the fiscal problem would help lift growth prospects.

On developing economies, the IMF chief said the sovereign debt situation in emerging and low-income countries had gradually improved in recent years due to domestic reforms and international cooperation, though progress had been uneven and rising global interest rates had created renewed pressure.

She said higher yields in advanced economies were lifting borrowing costs across global markets, in some cases more than offsetting the lower risk premiums emerging economies had achieved through improved policies, with high refinancing requirements and rising debt-servicing costs restricting the ability of many developing economies, particularly low-income countries, to spend on infrastructure, health and education, further threatening long-term growth and debt sustainability.

She added that developing economies also faced a sharp decline in net external financing, including reduced official development assistance and lower inflows from non-Paris Club creditors.

Kristalina Georgieva outlined three priorities for addressing developing-country debt challenges: decisive restructuring for countries with unsustainable debt, supported by improvements in international debt-resolution mechanisms including progress under the G20 Common Framework and the Global Sovereign Debt Roundtable's updated Restructuring Playbook; faster implementation of the IMF-World Bank Three-Pillar Approach for countries with sustainable debt pursuing growth-oriented reforms.\

This she said had worked well in countries including Ecuador and Pakistan; and greater debt transparency, stronger debt-management capacity and improved borrower-investor relationships, saying there was no substitute for sound economic fundamentals.

She also warned that excessive global economic imbalances had widened significantly in 2025, with the IMF's latest External Sector Report finding that excess imbalances not explained by underlying fundamentals had widened by 0.7 percentage points of global GDP, the largest increase in a decade, with major contributions from the world's two largest economies.

She said sustained rebalancing required policy action in both surplus and deficit economies, with surplus countries pursuing market-oriented reforms to boost domestic consumption and deficit countries undertaking fiscal consolidation to raise national savings, adding that the goal is to move from diagnosis to action.

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