The International Monetary Fund flagged several significant risks to growth and financial stability in their latest World Economic Outlook report released on Tuesday (October 13).

The report, released during a meeting of the IMF and World Bank in Bangkok, highlights growing debt levels, a prolonged Middle East conflict and the potential end of the AI investment boom as the main risks to the global economy. 

"The global economy has shown a lot of resilience", Deputy Director of the IMF's Research Department Petya Koeva-Brooks told CGTN, but "that resilience may be reaching its limits and will certainly be tested going forward".

On the assumption that the Strait of Hormuz reopens by next March and AI investment remains strong, the IMF predicts global growth at 3.1% for 2026 and 3.4% in 2027. However they detailed several scenarios that could significantly lower these figures. 

For instance, a more protracted war in the Middle East may keep oil prices above $130 through the first quarter of 2027, which would cut growth for that year by half a percentage point, the IMF says.

"The war in the Middle East is affecting many economies negatively, I would say most economies," says Koeva-Brooks. Forecasters hope the Strait of Hormuz will reopen soon and shipping conditions return to the pre-war situation, but neither is guaranteed.

The report also says a steep drop in AI investment could lead to a sharp drop in asset prices, ultimately cutting US GDP by 1.8% and global output by 1.1% by 2028.

The so-called 'AI revolution' has shot US stocks to record highs, but experts warn that too much complacency and dependency on the AI sector carries serious risk. At a recent Bretton Woods Committee event,  IMF Managing Director Kristalina Georgieva told attendees that the US now has "an economy that is standing on one leg, the AI leg".

"What if it wobbles? What if there is disappointment and that leads to potentially a more difficult environment?" she asked.

Koeva-Brooks told CGTN the AI boom is also widening disparities between nations. As the war in the Middle East hits economies worldwide, "AI is helping pull things up", she says, but that is actually only affecting a relatively small number of countries… The development across countries is quite uneven, which makes that picture [of a resilient global economy] somewhat fragile". 

The IMF report and attendees in Bangkok also highlighted risks from high public debt and rising bond yields driven by inflation. High debt servicing costs are particularly burdening developing nations, with Group of 24 Chair Taiwo Oyedele noting these countries pay $500 billion more for debt than advanced economies.

The IMF is urging countries to begin politically painful steps to shrink borrowing. It singled out Britain for praise as the only major advanced economy to have set out plans to reduce government borrowing over the coming years, encouraging its leaders to stay the course just weeks before the new UK government unveils its budget plans. 

Other countries seem to be moving in the opposite direction, says Josh Lipsky, vice president of international economics at the Atlantic Council. At the meeting in Bangkok he said: "France, Germany, the US all need to do fiscal consolidation... I'm afraid that it's going to take some kind of crisis to wake up and realize that this is what has to be done."

Koeva-Brooks told CGTN: "Our main message to governments is to really move from coping to actually rebuilding some of that resilience, rebuilding buffers in order to be able to face any further shocks that may come."