IMF Says Global Growth on Track to Reach 3% in 2026, But Risks Remain High

• The IMF said on Thursday the global economy ‌had weathered the energy shock caused by the war in the Middle East better than feared, and global economic output was still expected to expand by about 3% in 2026, but it cautioned that risks remained high.
• Julie Kozack, spokesperson for the International Monetary Fund, said oil and gas prices remained elevated and the energy shock from the war ​was not over. Global debt pressures were also mounting, and the disinflation process over the 2022 cost-of-living crisis had stalled. Global inflationary ​expectations have risen but remain well-anchored over the longer run, Kozack told a regular IMF briefing.
• The global lender will release an updated forecast during the annual meetings of the IMF and the World Bank in Bangkok from October 12 to 18. Kozack said the global economy was being pulled in opposite directions by the negative energy supply shock that was driving prices of energy, fertilisers, food and other commodities sharply higher, while the AI-led technology cycle was providing a positive demand shock.
• Risks remain high, with many countries needing to restock their oil and gas reserves, and energy demand set to rise as winter approaches in the Northern Hemisphere, she said. Pressures are also mounting on global public debt, which is already at nearly 100% of gross domestic product — the highest level since World War Two — and is set to rise further, Kozack said. Many advanced economies have particularly high public-debt-to-GDP ratios.
• Liquidity problems are also building in developing countries, including in Africa, partly due to a reduction in bilateral assistance, Kozack said. The IMF is urging central bankers to stick to their price stability mandates, while encouraging fiscal policymakers to develop medium-term consolidation plans, she said. The IMF was also urging authorities to focus on lifting growth prospects through structural reforms and removing "self-inflicted" barriers to growth, she said. Kozack said the IMF would look closely at the impact of new U.S. sanctions against Iran, including secondary sanctions aimed at firms in third countries that support Tehran. A fuller report was expected in the upcoming global outlook, she said.

(Source: Reuters)