IMF Warns: Global Economy Could soon Test Limits of Resilience

By Staff, Agencies

The International Monetary Fund has warned that the global economy “could soon test the limits of resilience”, as emergency oil stocks run low and government budgets become overstretched.

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 added. “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 1982.

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.

Launching the report in Bangkok, Silvana Tenreyro, the IMF’s economic counsellor, said “the global economy has been resilient, but that resilience is reaching its limits”. She urged policymakers to “move from just coping, to rebuilding”.

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.

US growth remains unchanged at 2.3% this year and revised up to the same pace, 2.3%, for 2027 – from 2.2% at the last update.

The IMF predicted GDP growth of 1.3% for the UK this year – up 0.3 percentage points from its most recent update in July – in welcome news for the chancellor, John Healey, who is poised to arrive in Bangkok later this week.