Despite some easing, trade tensions remain subject to occasional flare-ups, and policy uncertainty is still significantly higher than it was in January 2025, the International Monetary Fund (IMF) said in its World Economic Outlook Update released on January 19.
The IMF projects global growth to remain resilient at 3.3% in 2026 and 3.2% in 2027, broadly in line with the estimated 3.3% expansion in 2025. The outlook marks a small upward revision for 2026 and no change for 2027 compared with the October 2025 forecast. The Fund said the steady headline numbers mask the balancing of divergent forces across the global economy.
Headwinds from shifting trade policies continue to weigh on activity, even as recent developments have helped stabilise tensions. A dispute between the United States and China involving controls on exports of semiconductors and rare earth minerals was followed by a truce that reduced bilateral tariffs until November 2026 and introduced a pause on export controls.
The United States also removed tariffs on some agricultural products for all countries, offsetting higher tariffs on certain sectors that were previously announced and are now in effect. As a result, the IMF said the overall US effective tariff rate remains broadly unchanged from assumptions made in October, although the changes for specific countries can be meaningful.
These trade-related headwinds are being offset by tailwinds from surging investment linked to technology, including artificial intelligence, particularly in North America and Asia. The IMF said accommodative financial conditions, fiscal and monetary support, and the adaptability of the private sector have also helped sustain global momentum.
Global financial conditions remain broadly accommodative despite some volatility and rising sovereign yields. Equity markets have shown an increasing divergence, with stock prices of major technology companies pulling further away from the rest of the market. The IMF noted that overall financial conditions have changed little or tightened only moderately.
Global headline inflation is expected to decline gradually, easing from an estimated 4.1% in 2025 to 3.8% in 2026 and further to 3.4% in 2027. Inflation projections are broadly unchanged from the October outlook. However, the IMF said inflation is expected to return to target more slowly in the United States than in other large economies.
Despite the resilient baseline, risks to the outlook remain tilted to the downside. The IMF warned that a reassessment of productivity growth expectations related to artificial intelligence could dampen investment and trigger an abrupt financial market correction. Renewed trade tensions, domestic political or geopolitical disruptions, and high public debt and fiscal deficits could further disrupt financial markets, supply chains, and commodity prices, weighing on global growth.
