The International Monetary Fund (IMF) released its October 2026 World Economic Outlook yesterday. The IMF slightly upgraded its global economic growth projections, while warning that the outlook is highly uneven and risks are building. The global economy has demonstrated its resiliency in recent years, despite rising trade and geopolitical tensions, along with surging energy prices.

The IMF expects the world economy to grow by 3.1%  in 2026, up from 3.0% in its July report but below 3.5% growth in 2025. Economic growth should rebound to 3.4% in 2027. Global inflation is forecast at 4.7% this year, before easing to 4.1% in 2027.
Artificial intelligence (AI) is offsetting the energy shock. The boom in AI spending is helping cushion higher oil and gas prices tied to the conflict in the Middle East. The US is forecast to grow by 2.3% in both 2026 and 2027, China by 4.5% and Europe by just 1.1%.
Canada's outlook is modest. The IMF kept Canada's forecast unchanged at 1.1% growth in 2026, which is down from 1.9% last year. The IMF expects Canada’s economy to grow by 1.7% in 2027. That trails the 2.1% average for advanced economies and the 2.3% forecast for the US.
The IMF warned of a possible AI-related stock market correction, rising bond yields, growing debt and cyberthreats. Its forecast also assumes oil and gas shipments through the Strait of Hormuz resume by March 2027.

The IMF's message is that the global economy is holding up, but not evenly. Several risks continue to create challenges for the global economy. For Canada, steady but subdued economic growth leaves little cushion if energy prices, bond yields or trade tensions with the US move the wrong way.

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