Policymakers from over 100 countries gathered in Bangkok this week for the International Monetary Fund's annual meeting, where a striking observation emerged: the global economy has proved surprisingly resistant to turmoil. Six months of sky-high oil prices and geopolitical conflict have made less impact than feared, with growth holding up and stock markets avoiding a crash. Clemence Landers, vice-president of the Center for Global Development, noted that despite multiple crises, "a lot of countries are sort of defying gravity at all income levels."
However, the IMF struck a cautionary note. According to its World Economic Outlook, the cost of energy support measures governments deployed to shield citizens from surging oil prices has consumed 0.5% of global GDP. The fund warned that many nations cannot sustain this level of spending indefinitely. The IMF also flagged two serious concerns: unsustainable public finances in wealthy countries, with budget deficits at their highest since the Covid pandemic, and rising government debt expected to climb from 108% of GDP last year to 115% in five years. IMF managing director Kristalina Georgieva urged governments to "make urgent repairs to the fiscal house before the cracks widen."
A third concern centres on artificial intelligence investment. The IMF warned that market expectations for AI may outpace actual productivity gains, risking "near-term disappointment." This fear appears to be gaining traction in markets. South Korea's Kospi index recorded its biggest weekly loss since October 2008, falling 14.5% as investors reassessed AI company valuations, leverage levels and future profitability. Bonds issued by datacentre operator CoreWeave meanwhile slumped towards distressed levels.