Pakistan’s inflation rate is projected to rise to 9.9 percent in fiscal year 2026-27, while economic growth is expected to remain at 3.5 percent, according to the International Monetary Fund’s (IMF) World Economic Outlook (WEO) report released on Tuesday.

The IMF expects inflation to increase from 7.1 percent in fiscal year 2025-26, while the country’s Gross Domestic Product (GDP) is forecast to grow by 3.5 percent in the current fiscal year. The growth projection is unchanged from the lender’s previous forecast.

Pakistan’s current account deficit is expected to reach one percent of GDP in the current fiscal year, while the unemployment rate is projected to decline to 6.5 percent from 6.9 percent in the previous fiscal year.

Globally, the IMF expects economic growth to remain above three percent in 2026, with investment in Artificial Intelligence (AI) helping offset the impact of higher energy prices linked to the war in the Middle East.

The lender has forecast global growth at 3.1 percent for 2026, up from its July projection of 3.0 percent. Its forecast for 2027 remains unchanged at 3.4 percent, which is 0.2 percentage points higher than its April estimate.

The improved outlook for 2026 is largely driven by continued investment in AI infrastructure. The spending has also supported growth forecasts for advanced economies developing AI platforms and countries supplying the technology’s hardware, including South Korea, Malaysia, Mexico and Thailand.

“The global economy has been resilient, but that resilience is under strain, with risks to growth tilted to the downside,” the IMF’s new chief economist, Silvana Tenreyro, told reporters.

“A prolonged conflict in the Middle East could put additional pressure on inflation and slow down growth. A worsening of fiscal prospects, a reassessment of AI profitability, and extreme weather events could further weaken the outlook,” she added.

Among major economies, the IMF expects the United States (US) economy to grow by 2.3 percent in both 2026 and 2027. The forecast for 2026 is unchanged, while the projection for 2027 has increased by 0.1 percentage points.

Robust private consumption, tax cuts and AI investment are expected to support US growth, although the benefits of AI spending could be partly offset by the high import content of the technology.

The eurozone’s growth forecast for 2026 has been raised to 1.1 percent from 0.9 percent in July, supported by AI investment, participation in AI supply chains and higher defence spending across European Union countries.

The United Kingdom (UK)’s growth forecast has also been increased by 0.3 percentage points from July to 1.3 percent for 2026, reflecting higher AI investment.

China’s economy is projected to grow by 4.5 percent in 2026 and 4.0 percent in 2027, with both forecasts lowered by 0.1 percentage points from July. Higher oil prices are expected to add pressure to weak domestic demand despite strong exports.

India is forecast to remain the fastest-growing major economy, with growth of 7.0 percent in both 2026 and 2027. The projections have been raised by 0.6 percentage points for 2026 and 0.3 percentage points for 2027 compared with July, reflecting strong domestic demand, services activity and AI investment.

The IMF expects global headline consumer price inflation to reach 4.7 percent in 2026 before easing to 4.1 percent in 2027.

The report also highlights uncertainty surrounding AI investment. Under a scenario of faster adoption and increased investment, global GDP could be an additional 0.6 percent higher by 2029, with most of the gains going to the US and China.