- Global economies managed West Asia energy shock better than expected, says IMF chief
- Rising bond yields are causing growing fiscal pressures worldwide
- AI investment boom supports corporate earnings and consumer spending
Global economies have endured the West Asia triggered energy supply shock better than expected, according to International Monetary Fund Managing Director Kristalina Georgieva.
However, the IMF chief flagged growing fiscal bruises caused by rising bond yields amid a 'tug of war' between positives of the global AI investment boom, that is now beginning to cross US borders, and negatives of the energy shock.
While speaking at the briefing ahead of next week's Group of 20 finance leaders meeting in Asheville, North Carolina, Georgieva told reporters that the risks to the global outlook may be more balanced in comparison to April, but are still tipped downwards.
The downside risks come about primarily due to mounting fiscal pressures and the possibility that central banks of the world will have to maintain tight monetary policy to regulate inflation.
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Global growth has resisted powerful headwinds from high debt levels, stubborn inflation, and trade tensions as per Georgieva, and has "weathered the energy shock caused by the closure of the Strait of Hormuz better than we feared, thanks to a combination of factors," she highlighted.
This was possible in part on the back of drawdowns of oil and gas reserves by many countries including the United States, rise in non-Gulf energy supplies, lower energy demand, ramped up renewable energy capacity and a return to coal power generation in some places.
Robust investment in artificial intelligence in America has kept corporate earnings and consumer spending strong, and other countries are increasing their data-center construction and AI hardware supplies, she pointed out.
At the same time, she warned that the global energy shock is not over and policy makers should not become complacent with benchmark Brent crude prices hovering in the $80-$90 per barrel range since mid-June, well below its peak of over $126 per barrel back in April.
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