World economy to remain 'resilient' despite risks - IMF

19th Jan 2026 10:34

(Sharecast News) - The global economy is expected to remain "resilient" this year, the International Monetary Fund forecast on Monday, despite mounting trade tensions and geopolitical risks.

Publishing its latest World Economic Outlook, the IMF said world output would likely be unchanged on 2025 at 3.3% in 2026, before slowing marginally to 3.2%, in 2027. The Washington-based body said the "steady" performance was due to "the balancing of divergent forces".

In particular, it pointed to trade policy headwinds being offset by surging investment in technology, including AI, alongside fiscal and monetary support.

Global headline inflation was also slated to decline in 2026, from 4.1% last year to 3.8%. However, the IMF warned that risks to its outlook remained tilted to the downside.

"Re-evaluation of productivity growth expectations about AI could lead to a decline in investment and trigger an abrupt market correction, spreading from AI-linked companies to other segments and eroding household wealth," it argued.

"Trade tensions could flare up, prolonging uncertainty and weighing more heavily on activity. Domestic policy tensions or geopolitical tensions could erupt."

It also flagged the threat of larger fiscal deficits and high public debt, putting pressure on long-term interest rates.

Looking to the UK, the IMF expects inflation to reach its 2% target by the end of 2026, with interest rates also easing back during the year. Growth is expect to dip to 1.3% from 1.4% in 2025 before picking back up to 1.5% in 2027.

The IMF's report coincided with both the start of the World Economic Forum annual meeting in Davos and threats by Donald Trump to restart a global trade war.

Reacting angrily to Nato's allies deploying troops to Greenland, the US president - who wants to buy the island, despite significant global opposition - threatened to impose a wave of escalating tariffs in response from 1 February.