The global economy has shown resilience to the energy shock triggered by regional conflicts and supply disruptions, but fiscal vulnerabilities remain a growing concern, International Monetary Fund Managing Director Kristalina Georgieva said on Tuesday.
Speaking ahead of next week’s Group of 20 finance leaders’ meeting in Asheville, North Carolina, Georgieva noted that the closure of the Strait of Hormuz and broader Middle East tensions had not derailed growth as severely as initially feared. Mitigating factors included strategic drawdowns of oil and gas reserves, expanded non-Gulf energy supplies, softer demand, and increased renewable capacity. Coal use has also rebounded in some regions, providing additional buffer against supply constraints.
Benchmark Brent crude prices have held between $80 and $90 per barrel since mid-June, down from spring peaks above $118, easing immediate pressure on inflation. However, Georgieva cautioned that a renewed spike in energy costs could reignite price pressures, forcing central banks to maintain restrictive monetary policy stances. U.S. 30-year Treasury yields recently surged to 19-year highs, prompting U.S. Treasury Secretary Scott Bessent to announce a surprise doubling of long bond buyback sizes aimed at stabilizing borrowing costs.
Georgieva described a dynamic balance between growth tailwinds from artificial intelligence investment—spurring data-center construction and AI hardware demand—and downside risks from fiscal imbalances and trade fragmentation. She emphasized that countries must present credible fiscal plans to ensure debt and deficits remain sustainable, warning that mounting fiscal pressures could undermine economic stability.
She also reiterated calls for China to rebalance its growth model toward domestic consumption to reduce global trade imbalances. The IMF is set to update its global growth forecast in mid-October during the annual meetings in Bangkok, having trimmed its outlook to 3.0% for 2026 in July. Georgieva stressed that while the energy shock is not yet over, current conditions suggest a more contained impact than previously anticipated.
