UPDATE, OCTOBER 13, 3:57 A.M. EASTERN: The International Monetary Fund now forecasts global growth of 3.1 per cent in 2026 and 3.4 per cent in 2027. The formal October World Economic Outlook says heavy investment in artificial intelligence is offsetting part of the economic drag from the Middle East war, higher energy prices and trade uncertainty.

The new forecast raises the Fund’s 2026 estimate by 0.1 percentage point from its July update. It also adds detailed upside and downside scenarios for AI investment and the energy shock. Those figures materially expand TNC’s earlier coverage of the IMF annual meetings, so this article has been updated in place.

Growth is holding up, but fewer countries are driving it

The IMF says the headline forecast masks an increasingly uneven expansion. Thirty-two countries account for 95 per cent of projected global growth, compared with 54 countries in the Fund’s April outlook. Nearly half of the economies in the forecast have had their 2026 growth estimates downgraded since April.

AI-related capital spending is one reason global output has remained more resilient than expected. Faster adoption and stronger productivity gains could add about 0.6 per cent to global gross domestic product by 2029, according to the Fund’s upside scenario.

The downside is that markets may be pricing in capabilities or returns that fail to materialize. If weaker AI productivity were combined with tighter financial conditions, the IMF estimates global output could be 1.1 per cent lower by 2028 than in its baseline, with U.S. output 1.8 per cent lower.

Oil shock remains a central risk

The baseline assumes average oil prices of about US$96 a barrel in 2026 and US$87 in 2027. In a more severe war scenario with oil at US$130, the Fund says global inflation in 2027 could rise by 1.1 percentage points to 5.2 per cent.

That scenario would trim global growth by 0.2 percentage points in 2026 and 0.5 points in 2027. Energy-importing countries would bear more of the strain, while higher prices could force central banks to hold interest rates higher for longer.

Financial markets face separate pressure points

The IMF’s October Global Financial Stability Report says an AI-driven selloff, a sudden rise in government bond yields or a major cyberattack could amplify existing vulnerabilities. These are risk scenarios, not predictions.

Reuters reports that companies operating hyperscale data centres now account for about 10 per cent of global investment-grade bond issuance, up from less than one per cent in 2024. The Fund urged regulators to curb excessive leverage, including through derivatives and margin loans.

Its adverse stress test found that banks representing 22 per cent of global banking assets had weak capital levels, compared with 18 per cent in the 2025 exercise. That result identifies vulnerability under a hypothetical downturn; it does not mean those banks are failing.

Cyberattacks leave less time to respond

The stability report also warns that financial institutions depend on a concentrated group of technology providers while AI can make attacks faster and more sophisticated. The IMF says software providers had almost no time to patch vulnerabilities before exploitation in more than 70 per cent of observed cases in 2026, about 20 percentage points more than a year earlier.

A disruption at a critical vendor or financial institution could damage confidence and spread through interconnected markets. The Fund called for stronger cybersecurity capacity and closer oversight of third-party technology providers.

Why it matters to Canada

Canada is exposed through energy prices, trade, borrowing costs, pension investments and the international operations of its banks and technology companies. A sustained oil shock could lift costs even as exporters benefit from higher prices, while an AI repricing or global yield spike could affect Canadian assets regardless of where the initial shock begins.

The IMF says governments should rebuild fiscal room and avoid treating AI-led investment as a guarantee of durable growth. The article’s original October 7 publication date, URL and AI-labelled illustration have been preserved.

Sources: IMF, October 2026 World Economic Outlook; IMF World Economic Outlook release; IMF World Economic Outlook database; Reuters, October 13: global growth, AI and war risks; IMF, October 2026 Global Financial Stability Report; Reuters, October 13: global market risks.

Accompanying image: AI-generated editorial illustration, not a photograph of the meetings.