IMF Highlights Risks to Global Economy Amid Depleted Oil Stocks and High Debt

The organization credited the rerouting of oil supplies and the release of strategic energy stocks in mitigating the impact of the US-Iran conflict on oil prices. However, it warned that these emergency stocks are nearing depletion, and high debt levels across many countries may limit governments’ ability to shield consumers from potential price surges.

The IMF emphasized the need to bolster supply capacity and replenish policy resources to prevent future economic vulnerabilities. It pointed out that dwindling energy inventories could lead to rapid price spikes and supply disruptions following geopolitical shocks.

In March, the International Energy Agency announced record emergency oil stock releases, with plans to escalate this response following a meeting of oil ministers last month. However, recent reports indicated that the US strategic petroleum reserve has fallen to its lowest level since 1982, highlighting the system's fragility.

Last week, former President Donald Trump reached an agreement with Russian President Vladimir Putin to temporarily lift sanctions on US diesel imports from Russia, although analysts suggested this action would have little meaningful effect on prices.

The IMF published its report on Tuesday in Bangkok, where the IMF and World Bank are convening for their annual meetings attended by finance ministers and central bankers. Ahead of this gathering, IMF Managing Director Kristalina Georgieva urged governments to adopt stricter fiscal measures amid rising global debt levels. She stated, "We cannot keep delaying necessary policy action – you have the tools, now have the wisdom to use them."

The IMF slightly raised its global economic growth forecast for this year to 3.1%, up from 3% in July, while maintaining next year’s estimate at 3.4%. The forecast for US growth remains stable at 2.3% for this year and is revised upwards to 2.3% for 2027.

For the UK, the IMF predicted GDP growth of 1.3% this year, an increase of 0.3 percentage points from its last forecast. However, the organization slightly lowered its UK growth forecast for next year to 1.2% from 1.3% due to concerns over persistent high oil prices and rising interest rates, which could dampen growth by 2027.

The IMF identified significant downside risks for the global economy, particularly the potential for a prolonged conflict in the Middle East, which could escalate food and energy prices. It also highlighted risks from disruptions to energy infrastructure, cyber-attacks, and extreme weather.

Amid ongoing tensions, Trump has indicated potential military action against Iran in the near future, with negotiations for a peace agreement showing little progress. Elevated oil prices have resulted in a longer-lasting spike in inflation, which the IMF expects to remain at 4.7% this year—unchanged from July's forecast—and decline to 4.1% in 2027.

The IMF advised central banks to avoid overreacting to temporary inflation increases while remaining prepared for quick responses should inflation become entrenched. It called for agility in economic policy as conditions continue to evolve, also noting the ongoing risk of an AI-driven market crash.