New Delhi: Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), on Monday warned that the global economy continues to face repeated shocks and rising uncertainty as geopolitical tensions intensify.
Delivering the keynote address at a symposium hosted by Japan’s Ministry of Finance in Tokyo, Georgieva said the global economic environment has become increasingly fluid due to rapid changes in technology, demographics, geopolitics, trade, and climate conditions.
She said the world economy has shown notable resilience despite several crises over the past few years. According to IMF projections, global growth is expected to reach 3.3% in 2026 and 3.2% in 2027.
However, Georgieva warned that fresh geopolitical tensions are again testing this resilience, according to imf.org. She said the new conflict in the Middle East has already disrupted energy infrastructure and trade routes.
Important oil and gas facilities have suffered damage, while shipping traffic through the Strait of Hormuz has dropped by around 90%, she said.
Georgieva noted that energy security has become a major concern for countries in Asia and across the world. A prolonged conflict could affect market sentiment, economic growth, and inflation, she said.
About one-fifth of the global oil supply and the liquefied natural gas trade normally pass through the Strait of Hormuz. The route handles nearly half of Asia’s oil imports and about a quarter of its LNG imports. For Japan, nearly 60% of oil imports and 11% of LNG imports transit through the same route.
She added that global oil prices have increased by almost 50% since December, while gas prices in Asia and Europe have also risen sharply.
According to IMF estimates, a 10% rise in oil prices sustained through most of the year could increase global headline inflation by 40 basis points and reduce global output by 0.1 to 0.2%.
Georgieva said the IMF is currently gathering data and assessing the impact of these developments on member countries. The findings will be presented in the institution’s upcoming World Economic Outlook report.
She urged policymakers worldwide to prepare for unexpected shocks and strengthen economic resilience. Governments should focus on strengthening institutions, maintaining policy flexibility, and responding quickly to changing global conditions, she said.
Georgieva also highlighted the role of technological transformation and demographic change in shaping the global economy. Artificial intelligence could significantly boost productivity, though it may also reshape labour markets by replacing some jobs and creating new ones.
In Asia, the IMF estimates that AI could raise annual growth by up to 0.8 percentage points in the medium term. She said Japan has the potential to benefit from this transformation because of its long-standing leadership in automation and technological innovation.
The IMF chief also emphasised the importance of maintaining financial buffers. Strong fiscal and financial reserves allow governments and companies to absorb economic shocks and support growth during difficult periods.
She said policymakers should maintain fiscal space and rebuild buffers during strong economic periods so that governments can respond effectively when new crises emerge.
