IMF Warns Global Economy Could Test Limits of Resilience

The International Monetary Fund warned in its World Economic Outlook report that the global economy could soon test the limits of resilience due to depleted emergency oil stocks and overstretched government budgets. Released during annual meetings in Bangkok, the report marginally revised global growth forecasts upward to 3.1% for this year and 3.4% for next year, citing an AI-driven investment boom that has offset energy shocks from the US-Israeli war against Iran.

Growth is becoming increasingly uneven, with 32 economies now accounting for 95% of global growth. While tech-heavy nations like South Korea, Taiwan, Malaysia, Mexico, and Thailand are strengthening, the IMF forecasts deep recessions for Gulf nations, including Saudi Arabia, Iran, Iraq, Kuwait, Qatar, and the United Arab Emirates. Inflation is expected to rise to 4.7% this year, and the fund cautioned that a failure in AI productivity gains could trigger a sharp equity correction, potentially reducing global growth by 1.1% by 2028.

Downside risks include prolonged conflict, cyber-attacks, extreme weather, and rising bond yields. In response to these vulnerabilities, the IMF urged governments to address elevated public debt to rebuild fiscal buffers. Separately, Donald Trump reached a deal with Vladimir Putin to temporarily lift sanctions on US imports of Russian diesel to lower fuel prices, though analysts suggest the move will have little meaningful effect.