Forecasts show global growth holding steady at 3.3% in 2026, an upward revision of 0.2 percentage points from October estimates, driven largely by improved outlooks in the US and China. Remarkably, the projection remains broadly unchanged from a year ago, suggesting the world economy has shaken off the immediate impact of the tariff shock.
This resilience is attributed to a combination of easing trade tensions, stronger‑than‑expected fiscal stimulus, accommodative financial conditions and the private sector’s ability to adapt to trade disruptions. Emerging market economies have also benefited from improved policy frameworks.
A major driver is a continued surge in investment in the information technology sector, particularly in artificial intelligence (AI). Although global manufacturing remains subdued, IT investment in the US has climbed to its highest share of output since 2001. While concentrated in the US, the boom has delivered positive spillovers, notably boosting Asia’s technology exports.
Optimism around AI and automation has lifted stock markets sharply since late 2022, when the first widely used generative AI tools emerged. Favourable financial conditions and strong corporate earnings have fuelled capital spending, but firms are increasingly turning to debt to finance expansion, raising concerns about rising leverage.
Analysts warn that heavy reliance on debt could magnify risks if expected returns fail to materialise or if financial conditions tighten. Frequent, costly upgrades to advanced processors could also tighten profit margins and put additional pressure on firms’ balance sheets.
Comparisons with the dot‑com boom of 1995–2000 are instructive. While IT investment levels today resemble those of that earlier period, the increase has been more gradual. Market valuation growth, relative to economic size, mirrors the dot‑com pace, but price‑earnings ratios remain lower due to stronger earnings.
Current analysis suggests any overvaluation in the US equity index is only about half the level of the dot‑com bubble. Even so, global vulnerabilities remain significant for three reasons:
- Stock market gains are driven by a narrow group of AI‑related companies, increasing exposure to a concentrated sector.
- Many key AI firms are privately held, meaning their rising debts carry risks not seen in the dot‑com era.
- Market capitalisation is now far higher relative to output, making even a modest correction impactful.
AI could deliver productivity gains that lift global growth by 0.3% this year. But downside risks remain substantial. If AI‑related firms fail to deliver strong earnings, or if valuations fall, global growth could drop by 0.4% compared with baseline forecasts. A sharper decline in tech investment could trigger broader economic losses, particularly in tech‑heavy economies like the US and Asia.
Given rising foreign ownership of US equities, a market correction would reverberate globally, shrinking consumption in many countries. Even low‑income and high‑debt nations with limited tech exposure would be hit by weaker external demand and higher borrowing costs.
With valuations stretched and leverage rising, economists warn that strong regulatory oversight is essential. Financial supervisors must ensure robust lending standards across the banking and non‑banking sectors, particularly in tech‑linked industries.
Central banks should remain independent, maintaining focus on price stability while preparing for either tightening or easing, depending on how the tech boom evolves.
Governments are urged to reduce debt and rebuild fiscal space. Policymakers must also address AI’s uneven labour impacts through skills training, mobility support and competitive markets to ensure innovation benefits are widely shared.
Global growth has held firm despite trade disruptions, but underlying vulnerabilities, especially the concentration of investment in the tech sector, remain. AI’s transformative potential brings opportunity but also significant financial and structural risks. In an era of growing geopolitical tensions and weakening institutional frameworks, the challenge for policymakers is to encourage innovation while preventing a boom‑bust cycle that could undermine global stability.
–IMF/ChannelAfrica–
