The global economy is starting to look K-shaped. Here are the winners and losers, and where the U.S. fits.

By Greg Robb

IMF sees a split global economy, with countries less exposed to the oil shock and benefiting from AI demand pulling ahead

Shipping containers are stacked on a container ship at the Port of Los Angeles.

The global economy is starting to look K-shaped, with countries with limited exposure to the Iran-war shock and strong participation in the AI-technology upturn reaping benefits while others struggle, the International Monetary Fund said, in its latest report on the global economy released Monday night.

The global economy is projected to decelerate to a 3.1% growth rate in 2026 before recovering to a 3.4% rate in 2027. That's an upward revision of 0.2 percentage points for next year.

But this stable aggregate masks large cross-country offsetting movements.

Thirty-two countries now account for 95% of global growth, down from 54 countries in April. The IMF downgraded the forecast of almost 50% of the countries it surveys.

"Many countries with limited exposure to the war shock and strong participation in the technology upturn are seeing activity hold up or strengthen," the IMF said.

Countries in the upper leg of the K-shape include Taiwan, South Korea and India.

The U.S. is clearly in the winners circle, with growth projected at 2.3% this year and next, an upward revision of 0.2 percentage points for 2027.

The U.S. and China are responsible for more than 75% of the net imports of AI-related computing hardware in 2025 and 57% of newly built data centers since 2024.

"Conversely, energy-importing economies with little connection to the technology-value chain face the most difficult configuration: higher import costs and exchange-rate pressures, weaker real incomes, more constrained fiscal space and fewer offsetting demand impulses," the IMF said. Countries in Latin America and the Middle East saw their growth projections downgraded.

 
Area           2025 actual  2026 projection  2027 projection 
World output   3.5          3.1              3.4 
United States  2.3          2.3              2.3 
Euro area      1.2          1.1              1.2 
Germany        0.2          1.3              1.1 
France         0.9          0.4              0.7 
Italy          0.5          0.8              0.6 
Spain          2.6          2.5              1.8 
Japan          1.2          0.7              0.7 
U.K.           1.2          1.3              1.2 
Canada         1.9          1.1              1.7 
China          5.0          4.5              4.0 
India          7.8          7.0              7.0 
Russia         1.0          0.9              0.9 
Brazil         2.3          2.2              1.9 

Overall, the IMF said that the private sector appears to have so far adjusted well to the geopolitical shocks from the war.

But the possibility of larger economic costs are become more palpable. Beyond the near term, the economic fallout from "shifting political power balances and eroding stability and trust" is highly uncertain.

The IMF forecast is predicated on the reopening of the Strait of Hormuz by March 2027 and a return to prewar conditions broadly by the following October.

The AI-driven global technology cycle is assumed to be moderate. There is no assumption of an additional boost to productivity growth from AI adoption over the forecast horizon.

-Greg Robb

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10-12-26 2200ET