The global economy has proved more resilient than expected in the face of the energy shock linked to the Iran war, but growing government debt, persistent inflation and rising borrowing costs remain major risks, International Monetary Fund (IMF) Managing Director Kristalina Georgieva has warned.
Speaking to reporters ahead of next week’s Group of 20 (G20) finance ministers and central bank governors meeting in Asheville, North Carolina, Georgieva said the global outlook had become more balanced since April, although risks remained tilted to the downside.
She described the current economic environment as a **“tug of war”** between the negative impact of disruptions to energy supplies from the Gulf region and the positive effect of the rapidly expanding artificial intelligence (AI) investment boom.
According to Georgieva, global growth has so far managed to withstand several major pressures, including high levels of debt, stubborn inflation and trade tensions. She said the disruption caused by the closure of the Strait of Hormuz had also been less damaging than initially feared.
Several factors have helped cushion the shock, including countries drawing on oil and gas reserves, increased energy supplies from outside the Gulf region, weaker energy demand and the expansion of renewable energy capacity. Some countries have also increased their reliance on coal to compensate for shortages.
AI investment supports growth
Georgieva said strong investment in artificial intelligence in the United States was helping to support corporate profits and consumer spending. The AI boom is also spreading internationally, with countries increasing investment in data centres and the production of AI-related hardware.
However, the IMF chief cautioned that these positive developments should not encourage governments to become complacent.
The IMF cut its forecast for global economic growth in 2026 to **3.0% in July**, describing the outlook as sluggish and warning that the Middle East conflict, fragmentation of global trade and uncertainty surrounding AI could pose additional risks.
The Fund is expected to publish a new global growth forecast in October during its annual meetings with the World Bank in Bangkok.
IMF warns energy shock is not over
Georgieva also warned that the recent decline in oil prices should not be interpreted as the end of the energy crisis.
Brent crude has traded around **$80-$90 a barrel since mid-June**, according to the report, after prices surged above $118 earlier in the year.
“The energy shock is not over,” Georgieva said, warning that another sharp increase in oil prices could reignite inflation.
A renewed inflationary surge could force central banks to keep interest rates high for longer, increasing debt-servicing costs for governments and businesses while putting additional pressure on economic activity.
She urged governments to develop credible plans to bring their debt and budget deficits onto sustainable paths.
Her remarks come amid concerns over rising borrowing costs, including a recent increase in the yield on the U.S. government's 30-year Treasury bonds to their highest level in 19 years.
Central banks urged to remain focused on inflation
Georgieva said central banks should remain firmly focused on maintaining price stability despite the risk that high interest rates could weaken economic growth.
She also called for action to address what she described as **“excess global imbalances,”** which have contributed to tensions in international trade.
Although she did not identify individual countries, the IMF has previously urged China to reduce its dependence on exports and strengthen domestic consumer demand as a source of economic growth.
Georgieva argued that a more balanced global economy would ultimately benefit countries around the world, although achieving that goal could prove more difficult as geopolitical and trade fragmentation increases.
The IMF is also working to improve the way it assesses external economic imbalances, with further analysis expected on how macroeconomic conditions, trade policies and industrial strategies contribute to global economic disparities.
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