The International Monetary Fund raised its 2026 global growth forecast by 0.2 points from July, to 3.1%. That is still down from 3.5% in 2025. The euro area is expected to grow 1.1% this year and 1.2% next. Germany is forecast at 1.3% this year and 1.1% in 2027, and Spain at 2.5%. The UK sits at 1.3%, easing to 1.2% next year.
France is the outlier. The Fund now expects the economy to expand just 0.4% this year, down from 0.9% in 2025, and 0.7% in 2027. It sees French unemployment climbing from 7.7% to 8.4%.
The tone is blunter than the growth figures. The Fund expects net government borrowing across advanced economies to reach 5.2% of GDP this year, the widest gap since the pandemic year of 2021. Deficits in the United States and China are projected at or above 8% of GDP, and global public debt is heading towards 100% of GDP before the decade ends.
"We need to restore fiscal space," IMF chief economist Silvana Tenreyro told reporters in Bangkok, where finance chiefs are gathering for the annual meetings. She said the global economy's resilience "is reaching its limits." The Fund wants any support for households hit by energy costs to be temporary and targeted, and it says monetary policy should stay firmly focused on price stability. Core inflation in the euro area is not expected back at 2% until mid-2028. Gas storage in parts of Europe is below seasonal norms ahead of winter.
The timing is awkward for Paris. The National Assembly began debating the government's 2027 budget on Tuesday, with student protests entering a third week. French borrowing costs have climbed to levels not seen in almost a quarter of a century, which has revived talk of contagion across the euro area. In Rome, Finance Minister Giancarlo Giorgetti insisted his budget will respect EU fiscal rules ahead of a cabinet meeting that evening.
The IMF also flagged a risk from the other direction: the AI-driven investment boom that has propped up growth "could stop abruptly" if expectations about profits are reassessed. Korean chip stocks fell sharply overnight on exactly that worry.
For the euro area the message is uncomfortable but clear. Growth of just over 1% leaves little room to absorb higher interest costs, and the Fund is telling governments to consolidate while the economy still holds up. France is where that advice bites hardest, because a weak economy, a divided parliament and a bond market already on edge make any budget compromise expensive.
Watch the French budget vote and the next sovereign spreads. If Paris cannot show a credible path, the pressure will not stay French for long.
