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IMF Warns Global Growth Resilience Nears Limits Amid Rising Risks
IMF Warns Global Growth Resilience Nears Limits Amid Rising Risks
IMF projects global growth at 3.1 percent in 2026, while headline inflation is expected to rise to 4.7 percent.
Energy disruptions, AI market vulnerabilities and rising public debt threaten the global economic outlook.
IMF urges governments to rebuild fiscal buffers and central banks to prioritise price stability.
October 13, () – The International Monetary Fund (IMF) has warned that the global economy’s resilience to successive shocks is approaching its limits, citing rising energy prices, mounting public debt, higher borrowing costs and vulnerabilities linked to the artificial intelligence (AI) boom.
Silvana Tenreyro, Economic Counsellor and Director of the IMF’s Research Department, gave the warning during the presentation of the World Economic Outlook (WEO) at the ongoing 2026 IMF and World Bank Group Annual Meetings in Bangkok, Thailand.
She said prolonged disruptions to energy supplies and financial market uncertainty could weaken global growth further and intensify inflationary pressures.
Energy shocks threaten growth outlook
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The IMF projects global economic growth at 3.1 percent in 2026, while global headline inflation is expected to rise to 4.7 percent before easing to 4.1 per cent in 2027. Core inflation is projected at 3.9 percent in 2026 and 3.7 per cent in 2027.
Tenreyro said the global economy was being shaped by two opposing forces: higher energy and commodity prices associated with the war and a technology boom driven largely by AI, which is supporting investment, demand and trade.
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Although their effects on economic activity differ, she said both forces were contributing to inflationary pressures.
She identified prolonged energy supply disruptions, excessive concentration in AI-related investment and trade, and rising fiscal pressures as three major risks to the outlook.
Renewed tensions in the Middle East have pushed up prices of crude oil, gas and refined petroleum products, including diesel and jet fuel. Tenreyro warned that further disruptions to production and transportation could trigger additional increases in energy and commodity prices.
She said adjustments such as rerouting energy supplies, increased production elsewhere, inventory drawdowns, alternative energy sources and improved efficiency had helped cushion the global economy.
Without these adjustments, she said, global growth in 2026 would have been 2.5 percent instead of the projected 3.1 percent.
However, she cautioned that some of these protective measures were nearing their limits, while extreme weather associated with El Niño could intensify supply pressures.
AI boom, debt pose additional risks
On artificial intelligence, Tenreyro said technology-related investment and trade had become important drivers of global growth, but warned that the concentration of supply chains in a few countries, sectors and companies created vulnerabilities.
A correction in AI-related market valuations or cybersecurity threats could weaken economic activity and threaten financial stability.
She also warned that rising borrowing costs and interest payments could crowd out essential public spending, leaving governments with less capacity to respond to future shocks.
Under the IMF’s adverse-risk scenario, growth in advanced and emerging market economies could be 0.5 to 0.6 percentage points lower by 2027 than under the baseline forecast, while inflation would be materially higher.
The outlook also varies across countries, depending on their exposure to commodity prices, participation in AI-related activities and borrowing costs. Energy-importing economies and many low-income countries and fragile states face particular vulnerabilities.
IMF urges fiscal discipline, price stability
To mitigate the risks, Tenreyro urged countries with high debt and budget deficits to begin fiscal consolidation and place public finances on a sustainable path.
She said support for vulnerable households should be temporary and targeted, while preserving price signals that encourage efficient resource allocation.
She also called on central banks to prioritise price stability and maintain sufficiently restrictive monetary policies where necessary to prevent further inflationary pressures.
Tenreyro stressed the importance of central bank independence, rebuilding fiscal buffers, safeguarding financial stability and strengthening supply-side resilience.
“The economy has been resilient, but that resilience is reaching its limits,” she said, urging countries to move beyond managing successive shocks and rebuild their capacity to withstand future disruptions.
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