IMF chief warns energy shock, debt and AI investment boom threaten global growth

International Monetary Fund (IMF) Managing Director Kristalina Georgieva has warned that persistently high energy prices, record public debt and risks linked to the artificial intelligence investment boom could weigh on global growth and keep inflationary pressures elevated.

Speaking in Singapore ahead of next week’s IMF and World Bank Annual Meetings in Bangkok, Georgieva said the global economy was being pulled in two opposing directions: a negative energy supply shock stemming from conflicts in the Middle East and a positive demand shock from AI investment that is also adding to inflation.

“The combined impact of these two forces is highly uneven across the world,” Georgieva said, noting that the AI boom was bypassing many countries.

The IMF’s upcoming growth forecasts are expected to show the sharpest downgrades in economies affected by war, including Ukraine and Gulf countries hit by Iranian strikes and reduced energy exports.

The IMF had forecast global growth at 3.0 per cent for 2026 in July, followed by a rebound to 3.4 per cent in 2027. Those projections assumed the Strait of Hormuz would begin reopening in mid-July and return to pre-war conditions by March 2027.

However, energy prices remain elevated. Georgieva said oil prices were around $100 a barrel, while constrained refining capacity had added significant margins to key fuels such as diesel. Restricted natural gas supplies and disruptions to LNG shipping through the Strait of Hormuz could add further pressure as the winter heating season increases demand.

“Even if the war in the Gulf were to end soon, the problem of high energy prices will likely persist for some time,” Georgieva said. Brent crude futures also point to elevated oil prices through 2027.

Georgieva also warned that rising public debt was weakening growth and adding to inflationary pressures. Global public debt is at its highest level since the Second World War and is projected to exceed 100 per cent of global GDP before 2030, according to the IMF.

Advanced economies, particularly the United States, have some of the highest debt burdens, she said, arguing that governments can no longer depend on stronger economic growth alone to address fiscal pressures.

Georgieva called for credible medium-term fiscal consolidation plans in high-debt economies, alongside upfront measures where necessary to ease pressure on monetary policy.

Inflationary risks are also coming from multiple sources, including the AI investment build-out, energy and food price shocks, tariffs, higher defence spending and rising debt-servicing costs.

She noted that benchmark 10-year government bond yields in the US, Germany and Japan had reached their highest levels since 2007, 2009 and 1996, respectively, and were continuing to rise.

The warnings come as policymakers prepare to assess how the combination of geopolitical instability, elevated energy costs, fiscal pressures and rapid AI investment could reshape the global growth outlook.