The International Monetary Fund (IMF) has warned that the global economy is becoming increasingly vulnerable to further shocks as geopolitical conflict, energy price volatility and mounting public debt threaten the outlook. Although investment in artificial intelligence (AI) is supporting growth, the Fund cautions that the capacity to absorb additional disruptions is weakening.

In its October 2026 World Economic Outlook, titled Resilience Under Strain, Urgent Choices, the IMF forecasts global economic growth of 3.1% in 2026, up from 3.0% in its July projection, followed by 3.4% in 2027. However, the outlook remains exposed to risks from prolonged conflict, higher energy costs, financial market pressures and a possible correction in AI-related investment.

Energy prices and supply disruptions threaten resilience

The prolonged conflict in the Middle East has pushed oil prices above US$100 per barrel, increasing uncertainty over energy supplies and global trade. The IMF's baseline forecast assumes average oil prices of US$96 per barrel in 2026 and US$87 in 2027, with shipping through the Strait of Hormuz gradually returning to more normal conditions.

However, a more severe scenario in which oil prices remain above US$130 per barrel through the first quarter of 2027 would reduce global growth by 0.2 percentage points in 2026 and 0.5 percentage points in 2027. Under this scenario, global inflation could reach 5.2% in 2027, 1.1 percentage points above the baseline projection.

The IMF notes that companies and economies have so far cushioned supply disruptions by drawing on energy inventories and reserves, switching suppliers and energy sources, and reducing demand. But these buffers may become less effective if the conflict persists.

For energy-intensive industries, including pulp and paper manufacturing, tissue production and nonwovens, prolonged energy price volatility could increase operating costs and complicate production and investment planning. Higher transport costs and shipping disruptions could add further pressure across international supply chains.

Global growth is becoming increasingly concentrated

The IMF highlights a growing concentration of global economic expansion. Just 32 economies are now expected to account for 95% of global growth, compared with 54 economies six months earlier.

This concentration leaves the global outlook more dependent on a relatively small group of economies and increases the importance of regional differences in demand, investment and industrial activity.

For manufacturers and suppliers serving international markets, these disparities could influence order volumes, investment decisions and opportunities across different regions.

Uneven growth across major economies

The IMF's October outlook highlights diverging growth prospects among major economies. France faces a particularly subdued outlook, with GDP forecast to expand by just 0.4% in 2026 and 0.7% in 2027. Both projections have been revised down by 0.2 percentage points from the IMF's July forecasts.

Germany's economy is projected to grow by 1.1% in 2027, while UK growth is forecast at 1.2%, with high energy prices and interest rates weighing on consumption. Across advanced economies, growth is expected to slow from 2.1% in 2026 to 1.8% in 2027.

By contrast, the US economy is forecast to grow by 2.3% in 2027, slightly above the July projection of 2.2%, while China's growth forecast remains unchanged at 4.0%.

The IMF has also highlighted the resilience of Asian economies, where AI-related investment is helping offset headwinds from commodity markets. These differences point to an uneven global economic outlook, with regional demand and cost pressures likely to vary considerably.

AI investment supports growth, but risks remain

Investment in AI-related infrastructure and computing hardware continues to support economic activity. Taiwan and South Korea account for nearly two-thirds of additional computing-hardware trade, while the United States and China represented more than 75% of net AI-related imports in the previous year.

Nevertheless, the IMF warns that the global economy could be vulnerable if expectations surrounding AI prove excessive. A significant correction in AI-related investment could weaken economic activity and financial markets, undermining some of the growth currently supporting the outlook.

For industrial manufacturers, AI may offer opportunities to improve production efficiency, optimise maintenance and strengthen supply-chain management. However, weaker investment or a broader financial market correction could also affect financing conditions and demand for industrial equipment and materials.

Rising public debt limits governments' room for manoeuvre

Public debt represents another source of vulnerability. According to the IMF's fiscal projections, global public debt stood at just under 94% of GDP in 2025 and could reach 100% by 2029, a level last seen in the aftermath of the Second World War.

The Fund has warned that rising debt burdens and higher bond yields could increase borrowing costs and constrain governments' ability to respond to future economic shocks. It has called for credible fiscal adjustment plans to rebuild fiscal space and strengthen economic resilience.

Higher financing costs could also affect private-sector investment, particularly for capital-intensive industries considering new production lines, plant upgrades or energy-efficiency projects.