The global economy “could soon test the limits of resilience”, as emergency oil stocks run low and government budgets become overstretched, the International Monetary Fund has warned.
In its twice-yearly World Economic Outlook, the IMF said global growth had withstood the Middle East conflict better than feared over the past six months.
It said the rerouting of oil supplies away from the strait of Hormuz, and the release of strategic energy stocks, had helped to contain the impact on oil prices from the US-Iran war.
However, it warned that emergency stocks are now depleted, and high debt levels and deficits in many countries could leave governments with little capacity to protect consumers from any future jump in prices.
“Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience,” it said. “Inventories in energy markets are dwindling and additional geopolitical shocks could still transmit rapidly through prices and supply disruptions.”
The International Energy Agency announced the largest-ever emergency releases of oil stocks on to the market in March this year, and promised to accelerate it after a meeting of oil ministers last month.
But in a sign of the system’s vulnerability, the US strategic petroleum reserve was recently reported to have fallen to its lowest level since ۱۹۸۲.
Last week, Donald Trump agreed a deal with Vladimir Putin to temporarily lift sanctions on US imports of Russian diesel in an attempt to bring down prices at the pumps, which analysts said would have little “meaningful” effect.
The World Economic Report was published on Tuesday in Bangkok, where the IMF and World Bank are holding their annual meetings this week, with finance ministers and central bankers scheduled to attend.
Ahead of the gathering, the IMF managing director, Kristalina Georgieva, urged governments to tighten their belts, amid rising global debt levels. “We cannot keep delaying necessary policy action – you have the tools, now have the wisdom to use them,” she said.
In the report, the IMF revised up its forecast for global economic growth this year marginally, to ۳.۱% – against ۳% in its last update in July. Next year’s forecast is unchanged, at ۳.۴%.
US growth remains unchanged at ۲.۳% this year and revised up to the same pace, ۲.۳%, for ۲۰۲۷ – from ۲.۲% at the last update.
The IMF predicted GDP growth of ۱.۳% for the UK this year – up ۰.۳ percentage points from its most recent update in July – in welcome news for the chancellor, John Healey, who is set to arrive in Bangkok later this week.
However, the IMF also warned that prolonged high oil prices and rising interest rates meant growth was likely to “edge down” in ۲۰۲۷, “as higher energy prices and long-term interest rates weigh on consumption and investment”. It cut its UK growth forecast for next year modestly to ۱.۲%, from ۱.۳%.
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However, the IMF warned that “risks are skewed to the downside” for the global economy. In particular, it pointed to the threat of “a prolonged stalemate or further escalation in the Middle East”, which would lead to higher energy and food prices.
“Further disruptions to energy infrastructure, cyber-attacks, or extreme weather events could amplify these effects,” the IMF added.
Trump has continued to insist that he could launch another wave of attacks on Iran in the coming weeks, with little sign of a peace agreement being negotiated.
The persistence of elevated oil prices means the spike in inflation is now expected to last longer than previously forecast.
Global inflation is expected to be ۴.۷% this year – the same level as forecast in July – and to decline to ۴.۱% in ۲۰۲۷ – up from ۴% in the last update.
The IMF urged the world’s central banks not to overreact to short-term jumps in inflation, but to be ready to respond quickly if it appears to be becoming entrenched. “With economic conditions in flux, agility is at a premium,” it said.
As well as fresh turmoil in energy markets, the IMF pointed to the continuing risk to the global economy of an AI-driven market crash.
