Washington: The International Monetary Fund (IMF) has projected the United States economy to grow by 2.3 per cent in both 2026 and 2027, supported by strong consumer spending and investment in artificial intelligence, but warned that inflation, rising government borrowing costs and financial market risks could threaten the outlook.

In its latest October 2026 World Economic Outlook released on Tuesday, the IMF left its American growth forecast unchanged for 2026 while raising its 2027 projection by 0.2 percentage point from April.

The assessment comes despite disruptions to global energy supplies, continuing trade tensions and heightened uncertainty over the economic consequences of the Middle East conflict.

The IMF said American economic activity has benefited from robust private consumption, fiscal policy, favourable financial conditions and continued investment in technology.

The United States has also faced a relatively limited direct impact from the energy shock because of its position as a net energy exporter.

However, the Fund warned that the apparent strength of the economy could conceal vulnerabilities, particularly in financial markets and public finances.

US economic growth slowed to an annualised 2.2 per cent in the second quarter of 2026 from 2.5 per cent in the first quarter, according to figures cited in the report.

Business investment, stronger private consumption and exports helped offset weaker government spending and the drag from imports.

The IMF projected American consumer price inflation at 3.6 per cent in 2026, up from 2.7 per cent in 2025, before declining to 2.8 per cent in 2027.

It expects underlying inflation pressures to ease only gradually, with core inflation returning to 2 per cent around the middle of 2028.

The Fund's risk assessment presents a more troubling picture.

It estimated a roughly 30 per cent probability that US economic growth would fall below 1 per cent in 2027, consistent with a relatively mild recession beginning in the final quarter of 2026.

That probability is lower than the 35 per cent estimated in April.

But the risk of higher inflation has increased.

The IMF estimated a 30 per cent probability that American headline inflation would exceed 4 per cent in 2027, compared with 20 per cent in its April assessment.

The report also highlighted the growing influence of artificial intelligence investment on American economic performance.

Spending on semiconductors, data centres, electricity generation and related infrastructure has supported demand and helped counter the negative effects of geopolitical uncertainty.

IMF warns against dependency on limited technologies

However, the IMF cautioned that the expansion is becoming increasingly dependent on a limited number of technology companies and sectors.

It examined a scenario in which disappointing returns from artificial intelligence trigger a sharp correction in technology investment and equity markets.

Under that scenario, US equity prices fall by 20 per cent in 2026, while weaker investment and tighter financial conditions reduce economic activity.

The combined global consequences could be substantial, with American output falling 1.8 per cent below the baseline projection by 2028.

The IMF also identified fiscal risks, citing elevated public debt, large financing requirements and higher long-term government borrowing costs.

It recommended credible fiscal consolidation to reduce vulnerabilities and help contain pressures on interest rates.