BRIAN ANGWENYI, TV OYOMINTO NEWS EDITOR AND SOCIAL MEDIA MANAGER.
The International Monetary Fund has slightly improved its forecast for global economic growth in 2026, projecting the world economy to expand by 3.1 per cent, while warning that rising debt, expensive energy and uncertainty surrounding artificial intelligence could threaten the outlook.
The revised projection, announced on Tuesday, October 13, raises the IMF’s previous forecast of 3.0 per cent but remains below the 3.5 per cent growth recorded in 2025. The institution expects global growth to improve to 3.4 per cent in 2027.
The assessment was released as finance ministers and central bank governors gathered in Bangkok, Thailand, for the annual meetings of the IMF and World Bank.
The outlook reflects an economy being supported by investment in artificial intelligence but facing pressure from geopolitical tensions, elevated energy costs and growing public debt.
Artificial intelligence supports growth
The IMF identified investment associated with artificial intelligence as an important source of economic support.
Demand for computing equipment, advanced chips and other technology infrastructure has created opportunities for businesses involved in developing and supplying AI systems.
However, the benefits are unevenly distributed. The IMF reported that the United States and China account for more than three-quarters of net demand for imports of computer chips and other AI-related equipment.
This concentration means some economies and industries may benefit significantly while others experience weaker growth.
There are also concerns that expectations surrounding AI could become excessive, potentially leading to market corrections if investment returns fail to meet expectations.
The IMF has warned that the impact of AI on employment could be substantial, as some jobs are transformed, downgraded or eliminated while new roles emerge.
For governments, the challenge is to encourage innovation while preparing workers for changes in the labour market.
Energy prices remain a major risk
The global economic outlook is also being shaped by elevated oil and gas prices amid conflict in the Middle East.
Higher energy costs increase expenses for transport companies, manufacturers, farmers and households. Businesses may pass some of those costs to consumers, contributing to inflation.
The IMF’s projections assume that oil and gas shipments through the Strait of Hormuz will resume by March and that demand associated with the AI boom will moderate.
If those assumptions do not hold, the global economy could face additional pressure.
Countries that depend heavily on imported fuel are particularly vulnerable because rising energy bills can increase import costs and reduce the amount of money available for other economic activities.
Developing economies face additional pressure
The IMF expects developing and emerging economies to grow by 3.7 per cent in 2026, down from 4.5 per cent in 2025, before recovering to 4.4 per cent in 2027.
The slowdown reflects differences in countries’ exposure to energy costs, geopolitical disruptions and changing global demand.
Economies with limited fiscal space may find it difficult to cushion households and businesses against rising costs.
High borrowing costs can also make it more expensive for governments to finance infrastructure and social programmes.
For African economies, these pressures reinforce the importance of managing public debt, strengthening domestic revenue and improving the resilience of food and energy supply chains.
What the outlook means for Kenya
Kenya’s economy is influenced by international fuel prices, global trade, tourism, investment and access to financing.
Higher oil prices can increase the cost of transporting goods and operating businesses, placing pressure on consumers and producers.
Meanwhile, a slowdown in major trading partners could affect demand for Kenyan exports, tourism services and other sources of foreign income.
However, global forecasts do not determine Kenya’s economic performance on their own. Domestic agricultural production, government policy, private investment and consumer demand also play important roles.
Kenya could benefit from technological investment and new digital opportunities if businesses and workers can access the necessary skills, infrastructure and financing.
The challenge is ensuring that technological change creates opportunities across the economy rather than concentrating gains in a small number of firms or countries.
A cautious outlook for 2027
The IMF’s revised forecast suggests that the global economy remains capable of expanding despite significant uncertainty.
Nevertheless, policymakers must prepare for risks linked to energy disruptions, debt accumulation, financial market volatility and rapid technological change.
Governments will need to balance efforts to support growth with the need to maintain sustainable public finances.
The bottom line: The IMF’s 3.1 per cent growth forecast offers a modestly improved outlook for 2026, but it does not eliminate the risks facing the global economy. For countries such as Kenya, resilience will depend on sound economic management, diversification and the ability to adapt to changes in energy markets and technology.
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