International Monetary Fund Managing Director Kristalina Georgieva warned on Wednesday that the global economy is under threat from persistently high energy prices, record public debt and risks from the artificial-intelligence investment boom. Speaking in Singapore ahead of next week's IMF and World Bank Annual Meetings in Bangkok, she urged governments to implement protective fiscal and monetary policy measures.
Georgieva said the world is being pulled in two directions at once: a negative energy-supply shock caused by the Middle East conflicts, and a positive but uneven demand shock from artificial intelligence that is also fuelling inflation. She added that the combined impact of these two forces is highly uneven across the world, and that the AI boom is bypassing many countries.
The IMF chief said new growth forecasts to be released during the Bangkok meetings will show the biggest downgrades in economies ravaged by war. These include Ukraine, which has suffered significant damage to civilian and economic infrastructure, and Gulf countries hit by Iranian strikes and sharply reduced energy exports. She did not indicate in her prepared remarks whether the IMF's latest World Economic Outlook would change the overall 2026 global growth forecast from the sluggish 3.0 percent rate forecast in July.
That July forecast, which predicted a rebound to 3.4 percent growth in 2027, assumed the Strait of Hormuz would start to reopen in mid-July and return to pre-war conditions by March 2027. It also assumed oil prices would average 89 dollars a barrel in 2026 and 78 dollars a barrel in 2027. Georgieva said oil prices remain at 100 dollars a barrel, with impaired refining capacity adding another 100 dollars in crack-spread margins per barrel for key products including diesel.
The winter heating season will boost demand even as natural gas supplies remain restricted by threats to LNG shipping through the Strait of Hormuz, Georgieva added. She said that even if the war in the Gulf were to end soon, the problem of high energy prices would likely persist for some time, and Brent crude oil futures predict high oil prices through 2027.
Higher energy prices are pushing up inflation, policy rates and benchmark bond yields, she said. Georgieva noted that ten-year sovereign yields in the United States, Germany and Japan are now at their highest levels since 2007, 2009 and 1996 respectively, and are still climbing.
Georgieva also warned that a growing public debt burden is sapping growth and adding inflationary pressures. The IMF says public debt is at the highest level since the Second World War and is projected to exceed 100 percent of GDP before 2030. She singled out advanced economies, led by the United States, as the worst offenders on debt loads, with debt-to-GDP ratios higher than emerging markets and low-income countries.
Policymakers can no longer rely on higher growth rates alone to solve fiscal problems, Georgieva argued. She said there is still no decisive action in high-debt advanced economies, where the need of the hour is for credible medium-term fiscal consolidation plans, supported in some cases by upfront fiscal measures, including to take some pressure off monetary policy. After five-and-a-half years of above-target inflation, inflationary pressures are persisting from the AI build-out, energy and food price shocks, tariffs, higher defence spending and higher debt service costs.
Georgieva said now may be a good time for a prudently hawkish bias in many countries' monetary policy, and described rate hikes by the US Federal Reserve, the ECB and the Bank of Japan as highly appropriate. She added that the most important task for monetary policy is to focus on price stability and for central banks to communicate their resolve. That requires central-bank independence and resistance to pressure from the fiscal side to buy debt or otherwise ease the burden, she said, adding: 'I would call this monetary cowboys, running to the rescue of the fiscal agents, and my message is: please don't.'
Georgieva also highlighted AI-related risks. Investment as a share of GDP is likely to exceed that of railroads, electricity grids or telecommunications infrastructure, she said. The rising economic and financial concentration puts pressure on AI companies to deliver productivity and earnings gains to justify lofty valuations, and market disappointment could turn into a far-reaching shock. Still, IMF research suggests AI, done right, could add a half percentage point of extra world growth annually. AI preparedness is key, she said, including regulatory guardrails that help manage substantial perils such as large-scale labour-market fallout, serious cyber and stability risks, and frontier models threatening to escape human control and run amok.
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