IMF: Time to rebuild 'resilient' world economy
The world economy is being reshaped by AI investment but held back by ongoing conflict in the Middle East, says the IMF.
At her inaugural IMF World Economic Outlook briefing in Bangkok, newly appointed director Silvana Tenreyro emphasized the global economy's resilience while cautioning that it is nearing its limits. With global economic activity expanding at 3.1% this year, the IMF director highlighted two key forces shaping the outlook. The first is surging energy and commodity prices due to conflict, acting as a negative supply shock, while the second is the rapid expansion of artificial intelligence, creating a positive demand shock.
Tenreyro warned that these forces are pushing inflation higher, with global headline inflation projected to rise to 4.7% in 2025 and 4.1% in 2027. The interaction of high public debt and higher financing costs has heightened fiscal concerns, especially for highly indebted countries. Borrowing costs and interest rate payments could crowd out essential spending, she explained.
The IMF's outlook reveals a highly uneven global landscape, with advanced economies experiencing subdued growth around 2%, while emerging markets like India (7.8% in 2025) and emerging Asia (5.6% in 2025) show stronger growth. Tenreyro identified energy exporters and AI-integrated economies as likely to perform better, while energy importers and those with limited AI participation face weaker growth prospects.
The IMF director identified three major challenges threatening global resilience. With renewed tensions in the Middle East, energy prices have surged, and a prolonged disruption could lead to even higher commodity prices. The second limit is technological concentration, as AI supply chains are highly concentrated, creating potential choke points.
The third challenge is fiscal, as higher commodity prices and fiscal concerns could lead to a reassessment of public borrowing risks, resulting in higher borrowing costs and inflation.
Written by urgent.news from Africa Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
