The global economy is showing signs of resilience, but its ability to withstand further crises could soon be tested, the International Monetary Fund (IMF) has warned. Declining emergency energy reserves, rising government debt and persistent geopolitical tensions are leaving countries increasingly vulnerable to another surge in oil prices.
In its latest World Economic Outlook, released on Tuesday in Bangkok, the IMF said the global economy had performed better than expected during the past six months despite the conflict in the Middle East. However, it cautioned that the measures used to limit the economic damage may not be sufficient if the crisis intensifies.
The report highlighted how countries had managed to reduce the immediate impact of the US-Iran war by redirecting oil supplies away from the Strait of Hormuz and releasing emergency petroleum reserves. These measures helped prevent a more severe disruption to global energy markets.
But the IMF warned that emergency stockpiles are now running low. At the same time, mounting public debt and widening budget deficits are restricting governments’ ability to shield households and businesses from another increase in energy costs.
“Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience,” the IMF said, warning that dwindling energy inventories could leave markets exposed to further geopolitical shocks.
The International Energy Agency announced its largest-ever emergency release of oil stocks in March and said last month that it would accelerate the process. Meanwhile, reports that the US Strategic Petroleum Reserve had fallen to its lowest level since 1982 have raised concerns about the country's capacity to respond to future supply disruptions.
US President Donald Trump has also reached an agreement with Russian President Vladimir Putin to temporarily ease restrictions on US imports of Russian diesel in an effort to reduce fuel prices. However, analysts have questioned whether the arrangement will deliver any meaningful relief to consumers.
The IMF published its report as finance ministers and central bankers gathered in Bangkok for the annual meetings of the IMF and World Bank.
Speaking at the launch, IMF economic counsellor Silvana Tenreyro said the global economy had demonstrated considerable strength, but that its resilience was approaching its limits. She urged policymakers to move beyond managing immediate crises and focus on rebuilding the economic safeguards needed to withstand future shocks.
IMF Managing Director Kristalina Georgieva had similarly called on governments to control spending and address rising debt levels before the meetings. She warned that delaying necessary policy decisions could make future economic challenges more difficult to manage.
Global Growth Forecasts Show Modest Improvement
Despite the growing risks, the IMF slightly upgraded its forecast for global economic growth in 2026 to 3.1%, compared with 3% projected in its July update. Its forecast for 2027 remained unchanged at 3.4%.
The US economy is expected to grow by 2.3% in 2026, with the same rate projected for 2027. The latter represents a small improvement from the IMF's previous forecast of 2.2%.
The UK also received a more positive outlook for the current year. The IMF raised its 2026 growth forecast by 0.3 percentage points to 1.3%, offering some encouragement to the government.
However, the outlook for Britain next year has weakened slightly. The Fund reduced its 2027 growth projection from 1.3% to 1.2%, citing the pressure that persistently high energy prices and rising long-term interest rates could place on consumer spending and business investment.
Inflation and Geopolitical Risks Remain a Concern
The IMF warned that the risks facing the global economy remain tilted towards a weaker outcome. A prolonged stalemate or further escalation in the Middle East could push energy and food prices higher, increasing costs for households and companies worldwide.
Additional damage to energy infrastructure, cyberattacks and extreme weather events could further disrupt supply chains and intensify inflationary pressures.
Trump has continued to suggest that further military action against Iran remains possible in the coming weeks, while there has been little indication of a lasting peace agreement being negotiated.
Against this backdrop, the IMF expects global inflation to remain elevated for longer than previously anticipated. Inflation is projected to reach 4.7% in 2026, unchanged from the July forecast, before easing to 4.1% in 2027. That is slightly higher than the previously projected 4%.
The Fund advised central banks to avoid reacting excessively to temporary increases in prices. However, it stressed that policymakers must remain prepared to act quickly if inflation becomes persistent.
Beyond geopolitical tensions and energy shortages, the IMF also identified the possibility of a market crash triggered by excessive enthusiasm surrounding artificial intelligence as another threat to global financial stability.
The report's central message is that resilience alone may no longer be enough. Governments must rebuild their financial capacity, strengthen energy security and prepare for further shocks before their remaining policy options become even more limited.
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