IMF's Georgieva says global economy is weathering the energy shock but flags fiscal strain

International Monetary Fund Managing Director Kristalina Georgieva said the global economy is "weathering" the energy shock unleashed by the war in the Middle East, but warned that fiscal pressures on governments are mounting as defence and energy costs rise, in remarks reported by Reuters late on 25 August.

Georgieva's assessment, delivered ahead of the IMF's annual meetings and the Jackson Hole central-bank symposium, is among the most authoritative public readings of the world economy since the disruption of Middle East energy flows this summer. Reuters reported that the IMF chief singled out fiscal concerns — not growth or inflation — as the dominant risk to the global outlook, signalling that the Fund sees a tougher budget path ahead for advanced and emerging economies alike.

The IMF's framing contrasts with a string of more bearish commentary from parts of Wall Street and the US Federal Reserve. While Fed officials Susan Collins and Tom Barkin warned this week that US rates may need to rise further absent fresh evidence of cooling inflation — remarks also carried by Reuters — Georgieva's tone was that the world economy is currently absorbing the energy hit rather than succumbing to it, even as the cost of insuring against further shocks climbs.

Georgieva's fiscal warning comes as governments from the United States to Europe face rising debt-servicing costs and renewed political pressure to expand defence and energy subsidies. Reuters reported that the IMF's near-term message is that the energy shock is "manageable" for now, but that a sustained period of high rates and elevated spending would test the fiscal architecture of several large economies, particularly those with weaker debt positions.

The IMF chief's remarks follow a stream of mixed signals from the global economy in August: the Ifo institute's German business-sentiment index rose more than expected, suggesting a measure of resilience in Europe's largest economy, while US consumer confidence fell to a seven-month low amid gasoline prices stuck above $4 a gallon — a divergence that underscores the IMF's warning about the uneven nature of the global recovery.

**Sources:** Reuters