WASHINGTON, Sept. 1 — IMF Managing Director Kristalina Georgieva described the global economy as a “storm-tossed vessel” on Tuesday, caught between high inflation, mounting debt and trade wars, even as the artificial intelligence boom provides a rare tailwind. Speaking to journalists in Washington, Georgieva said the world has “weathered the energy shock caused by the closure of the Strait of Hormuz better than we feared.” Energy prices have surged since the US and Israel launched their war on Iran, a conflict that has drawn Tehran into blocking the vital shipping lane through which a large share of the world’s oil passes.
Growth cut, risks tilted downward
The IMF trimmed its global growth projection for the second time this year last month, citing “uncertainty and risks” tied to the Middle East war. The fund’s World Economic Outlook update now sees the world economy expanding by 3.0 percent this year, down from the 3.1 percent it forecast in April. Georgieva noted the war’s impact has been “asymmetric,” hitting countries differently depending on their reliance on Gulf oil imports and the strength of their macroeconomic foundations. Inflation, pushed higher by costly energy, is now caught in what she called a “tug of war” with a “positive demand shock from AI” — the wave of massive investment in artificial intelligence that is stoking economic activity. “Risks to the outlook are more balanced than they were around our Spring Meetings [in April], but still tilted to the downside, and uncertainty remains high,” she said.
Winter risks, AI hopes
With winter approaching in the northern hemisphere, energy demand is set to climb again, and Georgieva warned the crisis is far from over. “A renewed rise in oil prices could fuel inflation, forcing central banks to retain a restrictive policy stance with knock-on implications on debt service costs and on economic activity,” she said. She urged governments to tackle fiscal imbalances, particularly around debt, and called on central banks to stay “laser-focused” on inflation. On AI, Georgieva struck a more hopeful note, saying its positive effects are showing up in more countries than just the United States, which leads the technology. Still, she acknowledged “significant unknowns” and warned that the risk of falling behind is “most profound” in developing countries — a concern that resonates across Asia, where many emerging economies are racing to harness AI while managing energy and debt pressures. The IMF chief concluded that despite the global economy’s resilience, there is “no room for complacency.” All eyes now turn to whether winter fuel demand reignites price pressures and how central banks respond — decisions that will shape borrowing costs and growth prospects for households and businesses across the region.
