IMF chief says global economy faces oil shock, AI boom

International Monetary Fund chief Kristalina Georgieva said on Tuesday, August 25, that the global economy was caught between inflation, debt and trade tensions on one side and the economic promise of artificial intelligence on the other.

Speaking to journalists in Washington, Georgieva said the global economy had so far handled the energy shock from the closure of the Strait of Hormuz better than the IMF had feared. But she warned that the shock was not over, with northern hemisphere winter demand possibly bringing another rise in oil prices.

“A renewed rise in oil prices could fuel inflation,” she said, adding that this could force central banks to keep restrictive policies in place and raise pressure on debt costs and economic activity.

The IMF cut its global growth projection in July for the second time this year, citing uncertainty and risks linked to the Middle East war. It estimated global growth at 3.0 percent this year, down from 3.1 percent in its April forecast.

Georgieva said the impact of the war had varied by country, depending on exposure to Gulf oil imports and broader economic stability. She said risks to the outlook were more balanced than in April but remained tilted to the downside, with uncertainty still high.

She also said AI investment was creating a positive demand shock and that its benefits were being seen beyond the United States. But she warned that AI still carried “significant unknowns” and that the risk of falling behind was greatest for developing countries.

Georgieva said there was “no room for complacency” and called on governments to address debt-related fiscal imbalances while central banks remained focused on inflation.