Global economic resilience under strain—IMF 

International Monetary Fund (IMF) says global economic resilience is under strain with risks to growth tilted to the downside. The fund said that Rising energy prices, higher borrowing costs and uncertainty surrounding artificial intelligence (AI) were among the key challenges threatening the global economic outlook.

Silvana Tenreyro, Director, Research Department, IMF, said this at a news Briefing on the IMF’s 2026 World Economic Outlook (WEO) Update, released on Tuesday at the 2026 IMF/ World Bank Annual Meetings in Bangkok, Thailand

The Report is titled:“Resilience Under Strain, Urgent Choices”.

Tenreyro said projected global economic growth was at 3.1 per cent in 2026, down 0.4 percentage points from 2025, adding that it would recover to 3.4 per cent in 2027.

Silvana said the global economy was being shaped by two opposing forces: rising energy and commodity prices triggered by the war in the MiddleEast, and an investment and trade boom driven largely by AI.

She said that higher energy and commodity prices constituted a negative supply shock that increased costs and constrained economic activity, while the AI boom was supporting demand, investment and trade. Silvana said although the two forces affected economic activity differently, both were exerting upward pressure on inflation.

She projected global headline inflation to rise to 4.7 per cent in 2026 before declining to 4.1 per cent in 2027, while core inflation would moderate to 3.9 per cent and 3.7 per cent, respectively.

Silvana said that rising borrowing costs in several advanced economies, combined with elevated public debt, had heightened fiscal concerns and increased risks to economic stability.

She said the outlook varied considerably across countries, depending on their exposure to commodity prices, participation in AI-related activities and access to affordable financing.

According to her, energy-exporting countries outside the conflict region and economies closely integrated into the AI investment cycle were expected to perform better.“Energy importers and countries with limited  participation in the technology boom face weaker growth prospects.

“Many low-income countries and fragile states belong to the latter group,” she said. She dentified three major constraints to global economic resilience: persistent energy supply disruptions, the concentration of AI-related investment and trade, and growing fiscal vulnerabilities.

On energy markets, Silvana said renewed tensions in the Middle East had pushed up crude oil, gas and refined petroleum product prices, including diesel and jet fuel. She said that a prolonged disruption to production and transportation in the region could trigger further increases in energy and other commodity prices.

She, however, said several adjustment mechanisms, including the rerouting of energy supplies, increased production elsewhere, inventory drawdowns, substitution towards alternative energy sources and improved energy efficiency, had helped cushion the impact.

“Without these measures, global growth in 2026 would have been 60 basis points lower at 2.5 per cent instead of the projected 3.1 per cent, ” she said.

Silvana said that some of the mechanisms, particularly inventory buffers and energy efficiency gains, were approaching their limits.

She also said that extreme weather events associated with El Niño could disrupt commodity markets further and worsen supply pressures.

On AI, Silvana said the technology-driven investment and trade boom had become an important engine of global growth. She said that concentrated supply chains involving a limited number of countries, sectors and companies, however, created potential vulnerabilities.

She said that a correction in AI-related market valuations and cybersecurity threats linked to the technology could weaken growth and pose risks to financial stability. “The third constraint is fiscal. Higher borrowing costs and interest payments can crowd out essential public spending and reduce governments’ capacity to respond to future shocks.

“There is a need for decisive policy action. Governments should exercise fiscal restraint, particularly in economies facing high debt and large deficits. Countries with significant fiscal vulnerabilities should begin consolidation measures to place budget deficits and, ultimately, public debt on a downward path,” she said.

Silvana said that any support measures introduced to cushion the impact of higher prices should be temporary and targeted at the most vulnerable, while preserving market price signals.

On monetary policy, she said central banks should remain focused on price stability and maintain sufficiently restrictive monetary conditions to prevent second-round inflationary effects and ensure that inflation returned to target. She said that the appropriate policy response would differ across countries, depending on initial inflation levels, labour market conditions and exposure to technology and commodity shocks.

She further emphasised the importance of central bank independence in achieving inflation targets. “The task ahead is to move from coping to rebuilding, restoring fiscal space and supply-side resilience, and in that way strengthen countries’ ability,” she said.