IMF warns global economy is resilient but exposed to rising risks

The autumn meetings of the World Bank and the International Monetary Fund in Bangkok opened a familiar debate: forecasters voiced caution, yet optimism about global growth remains resilient — particularly in parts of Asia — despite a host of new and lingering risks.

IMF: resilience under pressure

The International Monetary Fund says the global economy has so far shown resilience, but warned that this strength could soon face a serious test as multiple risks weigh on growth. Before the Bangkok gatherings the IMF marginally upgraded its global growth forecast, citing stronger-than-expected adjustments to supply disruptions, robust high-tech markets and a surge of investment linked to artificial intelligence.

Kristalina Georgieva, Managing Director of the IMF, framed the recent shifts as a change in global priorities: “It was inconceivable in Europe that one country could use military force to attack its neighbour — but it happened. It was inconceivable that states would use their natural resources as a lever to press for one thing, another or a third — but it happened. Therefore we must accept that the world, which valued only one thing: economic efficiency, without excesses, we relied on trade, we relied on each other, now is a world where security aspects must be taken into account.”

Silvana Tenreyro, the IMF’s Director of Research, highlighted how the AI investment boom has supported near-term growth but also concentrated risks: “The AI-related boom through investment and trade has been a key boost to global growth. But AI supply chains are tightly concentrated in a few countries, sectors and firms, creating potential bottlenecks. Moreover, market-value repricing and AI-related cyber threats may weigh on growth and add risks to financial stability.”

Energy disruptions have been partly mitigated by shifting supply routes away from the Strait of Hormuz, yet governments tapped strategic reserves to blunt price spikes. Those buffers are now depleted in many cases, leaving highly indebted countries with less capacity to shield consumers from future shocks. The IMF warned that persistently higher oil prices make elevated inflation stickier: global inflation is expected to reach 4.7 percent this year and slow to 4.1 percent next year, a touch above earlier forecasts.

Georgieva urged policymakers to shore up public finances and target support to the vulnerable: “What is our strongest appeal to policymakers right now? Undertake urgent repair of the ‘fiscal house’ before the cracks spread. Now is the time to strengthen revenues, rationalize spending and improve public financial management. When energy and food prices rise, protect people, not prices. That means temporary and targeted support for the most vulnerable, while preserving price signals.” The IMF also advised central banks to avoid overreacting to short-lived inflation spikes while remaining ready to act if inflation becomes entrenched.

Photo: press material from the event