The global economy “may soon test the limits of its resilience” as emergency oil stocks run out and government budgets become overstretched, the International Monetary Fund has warned.
In its biannual World Economic Outlook, the IMF said global growth had weathered the Middle East conflict better than expected over the past six months.
He said the diversion of oil supplies away from the Strait of Hormuz and the release of strategic energy stocks had helped contain the impact on oil prices of the US-Iran war.
However, he warned that emergency stocks are now exhausted and high debt levels and deficits in many countries could leave governments with little ability to protect consumers from any future price rises.
“Without strengthening supply capacity and rebuilding policy space, the global economy could soon test the limits of its resilience,” he said. “Inventories in energy markets are falling and further geopolitical shocks could still transmit quickly through prices and supply disruptions. »
The International Energy Agency announced the largest-ever emergency release of oil stocks to the market in March this year and promised to speed it up after a meeting of oil ministers last month.
But in a sign of the system’s vulnerability, it was recently reported that the United States’ strategic oil reserves may have fallen to their lowest level since 1982.
Last week, Donald Trump reached a deal with Vladimir Putin to temporarily lift sanctions on U.S. imports of Russian diesel in an effort to lower prices at the pump, which analysts said would have little “significant” effect.
The World Economic Report was released Tuesday in Bangkok, where the IMF and World Bank are holding their annual meetings this week, attended by finance ministers and central bankers.
Ahead of the gathering, IMF Managing Director Kristalina Georgieva urged governments to tighten their belts amid growing global debt. “We cannot continue to delay necessary policy measures – you have the tools, you now have the wisdom to use them,” she said.
In this report, the IMF revised its forecast for global economic growth this year slightly upwards, to 3.1% – up from 3% when it was last updated in July. The forecast for next year remains unchanged at 3.4%.
US growth remains unchanged at 2.3% this year and revised at the same rate, to 2.3%, for 2027 – up from 2.2% in the last update.
The IMF predicts GDP growth of 1.3% for the UK this year – up 0.3 percentage points from its last update in July – good news for Chancellor John Healey, who is expected to arrive in Bangkok later this week.
However, the IMF also warned that prolonged rises in oil prices and rising interest rates meant growth was likely to “slow” in 2027, “as rising energy prices and long-term interest rates weigh on consumption and investment”. It slightly lowered its UK growth forecast for next year, from 1.3% to 1.2%.
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However, the IMF warned that “risks are tilted to the downside” for the global economy. In particular, he highlighted the threat of a “prolonged standoff or further escalation in the Middle East”, which would lead to higher energy and food prices.
“Further disruptions to energy infrastructure, cyberattacks or extreme weather events could amplify these effects,” the IMF added.
Trump continued to insist he could launch a new wave of attacks on Iran in the coming weeks, with few signs of a negotiated peace deal.
The persistence of high oil prices means that the inflation surge is now likely to last longer than expected.
Global inflation is expected to reach 4.7% this year – the same level as forecast in July – and fall to 4.1% in 2027 – from 4% in the last update.
The IMF has urged central banks around the world not to overreact to short-term increases in inflation, but to be prepared to respond quickly if this trend appears to take root. “With ever-changing economic conditions, agility is paramount,” he said.
In addition to further turmoil in energy markets, the IMF highlighted the continuing risk to the global economy of an AI-driven stock market crash.
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