IMF warns of rising cost of global economic resilience

The International Monetary Fund warned that the global economy's resilience despite geopolitical shocks does not mean risks have receded, pointing to the rising cost of sustaining growth and shrinking capacity of countries to face new disruptions. This is attributed to accumulating public debt, rising borrowing costs, and persistent inflationary pressures.

Growth and Inflation Forecasts

The Fund expects global economic growth to reach 3.1 percent in 2026 and 3.4 percent in 2027, with inflation likely rising to 4.7 percent this year before declining to 4.1 percent next year. These estimates are based on the assumption of no renewed military escalation and a gradual return of energy markets to normal conditions.

Divergent Growth Among Economies

The forecasts reveal increasing divergence in economic trajectories, with the US economy expected to grow by 2.3 percent in both years, while India maintains strong growth at 7 percent. Conversely, the Fund lowered its forecast for the Saudi economy in 2026 to a contraction of 3.3 percent, down from a previous growth projection of 1.7 percent in a July update.

Financial Risks and Cost of Living

The Fund explains that rising food and energy prices exacerbate poverty and inequality, calling for temporary financial transfers to the most vulnerable households as a more efficient solution than general measures to curb prices. It also warns of risks associated with a correction in asset prices linked to artificial intelligence and rising sovereign bond yields, alongside the growing role of non-bank financial institutions, whose assets have reached approximately 13 trillion dollars globally.

Strengthening Financial Stability

The Fund calls for enhancing transparency, monitoring financial risks, and limiting excessive leverage, along with deepening international cooperation. It emphasizes that global economic resilience is contingent on countries' ability to contain inflation and manage debt risks, as shrinking fiscal margins make future shocks more costly.

Source: Syrian Arab News Agency (SANA)