The global economy has weathered the Iran war energy shock better than feared, International Monetary Fund Managing Director Kristalina Georgieva said on Tuesday, but she raised concerns about deteriorating fiscal conditions in some countries shown by rising bond yields and a stalled disinflation process.Georgieva told reporters in a briefing ahead of next week's Group of 20 finance leaders meeting in Asheville, North Carolina, that there was a "tug of war" between the negative Gulf energy supply shock and growth tailwinds from the artificial intelligence investment boom that was starting to spread beyond US borders.
She said risks to the global outlook were more balanced than in April, but still tilted to the downside, due to mounting fiscal pressures and the potential that central banks will have to maintain tight monetary policy to control inflation.
Global growth is "resisting powerful headwinds from high debt levels, stubborn inflation, and trade tensions. Thus far, it has weathered the energy shock caused by the closure of the Strait of Hormuz better than we feared, thanks to a combination of factors," Georgieva said.
These factors include drawdowns of oil and gas reserves by many countries, increases in non-Gulf energy supplies, lower energy demand, increased renewable energy capacity and a return to coal power generation in some places.
