Global economy in tug-of-war between oil shock and AI boom: IMF chief

The global economy has weathered the oil shock caused by the closure of the Strait of Hormuz "better than feared" due to various factors, including an investment boom in artificial intelligence, IMF Managing Director Kristalina Georgieva has said.

“What started out as a US phenomenon with AI is now becoming a growth engine for the global economy, with other countries ramping up construction of data centres and other infrastructure,” Georgieva told journalists on Tuesday.

She said the global economy had “weathered the energy shock caused by the closure of the Strait of Hormuz better than we feared” due to a combination of factors, including drawdowns of oil and gas reserves and increases in non-Gulf supply.

“And it is enjoying the tailwinds from an AI investment boom, most notably in the US, where both corporate earnings and consumer demand remain strong,” Georgieva said ahead of the G-20 finance ministerial meeting in Asheville, North Carolina, next week.

She said the global economy was witnessing a tug-of-war between the negative supply shock from West Asia and the positive demand shock from AI.

“The net impact of these two forces is asymmetric across countries and depends on their exposure to energy disruptions, macroeconomic vulnerabilities, and their position in the AI chain,” Georgieva said.

Georgieva said risks to the outlook were more balanced than around the Spring Meetings but remained tilted to the downside, while uncertainty remained high.

“Mounting fiscal pressures, as evidenced by rising bond yields, and a stalled disinflation process are sources of worry for both markets and policymakers,” she said.

The IMF chief said oil and gas reserves were shrinking and the northern hemisphere winter would arrive before long.

“This means the energy shock is not over: a renewed rise in oil prices could fuel inflation, forcing central banks to retain a restrictive policy stance, with knock-on implications for debt service and economic activity,” she said.

Georgieva said the future impact of AI remained subject to significant uncertainties, including possible risks to financial stability.

“Should the outlook deteriorate, it will further widen the dispersion of growth prospects around the world. Some countries, especially low-income countries that depend on fuel imports, are already in a tough spot,” she said.

For low-income countries, disruptions in the supply of oil, gas and other key commodities such as fertiliser could translate into food insecurity, a problem potentially exacerbated by extreme weather, Georgieva said.

“The risk of falling behind on AI is also more prominent in the developing world,” she said.

In July, the IMF lowered its 2026 global growth forecast to 3 per cent, warning of downside risks from the West Asia conflict, trade fragmentation and uncertainties surrounding artificial intelligence.

The institution's next revision of its growth outlook is due in mid-October during the IMF and World Bank annual meetings in Bangkok