Global economy so far resisting Iran war energy shock, IMF chief says

The International Monetary Fund (IMF) managing director, Kristalina Georgieva, stated on Tuesday that the global economy is faring better than anticipated despite energy supply disruptions caused by the Iran war. She expressed concern over rising fiscal pressures, but noted that factors such as oil and gas reserve depletion, increased non-Gulf supply, demand reductions, and a partial shift back to coal are helping the global economy resist these disruptions.

The IMF currently projects a 3% global economic expansion for the year, slightly lower than the previous forecast of 3.1%. However, they have also downgraded the Middle East's growth forecast for 2026 to 0.7%, a decline of 1.2 percentage points from April. Georgieva highlighted the AI boom as a significant contributor to the better-than-expected growth performance, noting that its benefits are now extending beyond the US.

She emphasized that the interplay between the AI growth and the energy supply crisis is creating an asymmetric impact across different countries, with global growth expected to recover to 3.4% next year. Rising bond yields are a sign of increasing fiscal pressures, causing additional anxiety among markets and policymakers. The US Treasury Department has doubled its government debt repurchases following the highest long-term yields in 20 years, and US national debt has surpassed $40 trillion, double its 2017 level.

Georgieva emphasized the need for all countries to address their fiscal issues and develop credible plans to ensure their debt and deficits are sustainable.