IMF Managing Director Kristalina Georgieva warned that persistently high energy prices, record public debt and risks from the AI investment boom are threatening global growth. Speaking ahead of next week's IMF and World Bank Annual Meetings in Bangkok, she said new forecasts will show the steepest growth downgrades in economies hardest hit by war.
Kristalina Georgieva, the IMF's managing director, told an audience in Singapore on Wednesday that the global economy is under threat from persistently high energy prices, record public debt and risks tied to the AI investment boom. She said the world is being pulled in two directions at once: a negative energy supply shock from Middle East conflicts and a positive demand shock from artificial intelligence that is also fuelling inflation.
According to Reuters: "The combined impact of these two forces is highly uneven across the world", Georgieva said, adding that the AI boom is bypassing many countries. New IMF growth forecasts due at the Bangkok meetings will show the biggest downgrades in economies ravaged by war, including Ukraine and Gulf states hit by Iranian strikes.
Energy costs keep climbing
Georgieva did not say whether the IMF's updated outlook would change its sluggish 3.0% forecast for 2026 growth, which had assumed a rebound to 3.4% in 2027 and oil averaging $89 a barrel this year. Instead, she said oil prices remain at $100 a barrel, with impaired refining capacity adding another $100 in crack-spread margins per barrel for products including diesel.
Winter heating demand will add further pressure as natural gas supplies stay restricted by threats to LNG shipping through the Strait of Hormuz. Higher energy prices are also pushing up inflation, policy rates and bond yields, and US, German and Japanese 10-year sovereign yields have climbed to their highest levels since 2007, 2009 and 1996, respectively.
Record debt limits the options
Public debt is at its highest level since World War Two and is projected to exceed 100% of GDP before 2030, Georgieva said, singling out advanced economies led by the United States as the worst offenders on debt loads. Policymakers, she said, can no longer rely on growth alone to fix their fiscal problems.
The strain is already visible in Europe, where bond spreads over German bunds are widening not just for France and Italy but also for Ireland and Portugal. Georgieva said rate hikes by the Federal Reserve, the European Central Bank and the Bank of Japan were highly appropriate, calling for a prudently hawkish bias in monetary policy in many countries.
AI's growth boost carries its own risk
On AI, Georgieva said investment as a share of GDP is likely to exceed what went into building railroads, electricity grids or telecommunications networks, and AI hardware already accounts for more than a tenth of world goods trade. The IMF estimates AI could add up to half a percentage point to annual world growth if done right, she said, but warned that pressure on AI firms to justify high valuations means a market disappointment could turn into a far-reaching shock.
She added that AI preparedness requires regulatory guardrails to manage risks including labor market fallout, cyber threats and frontier models that could escape human control.
Sources: Investing.com, CNBC
Trading involves risk.
Risk Disclaimer
