IMF's Georgieva warns global growth remains vulnerable despite stronger 2026 outlook

International Monetary Fund Managing Director Kristalina Georgieva said that the global economic outlook for 2026 has strengthened to around 3%, but warned that the world remains vulnerable to an unfinished energy shock, historically high public debt, stalled disinflation and uncertainty over the economic and financial effects of artificial intelligence.

Speaking at a meeting of G20 finance ministers and central bank governors in Asheville, North Carolina, Georgieva said policymakers broadly agreed on the need to lift potential growth as the global economy faces repeated shocks and heightened uncertainty.

“Structural reforms and sound fiscal and monetary policies are essential to creating the foundation for stronger and better-balanced global growth,” Georgieva said.

She said international cooperation also remains critical in helping countries manage debt problems, contain cross-border spillovers and address widening global economic imbalances.

Growth resilient, but risks remain

Georgieva said the global economy has absorbed the impact of the energy supply shock better than initially expected, helped by the use of strategic oil and gas reserves, alternative energy sources and demand-management measures.

Investment related to artificial intelligence has also supported economic activity, particularly in the United States, she said. Spending on power infrastructure needed to meet AI-related energy demand has become an additional source of growth, while economies integrated into the AI supply chain, including South Korea, have also benefited.

However, Georgieva warned that global averages mask significant differences among countries and that risks to the outlook remain elevated.

“The energy shock is not over,” she said, noting that the Strait of Hormuz remains largely closed, strategic oil and gas reserves will eventually need replenishing and AI is increasing global energy demand as the Northern Hemisphere approaches winter.

The IMF chief also highlighted the growing burden of public debt, which she said has reached almost 100% of global gross domestic product, exceeding levels seen after World War II and continuing to rise.

She compared the global debt trajectory to a “staircase,” with debt jumping sharply during major shocks and experiencing little or no reduction afterward.

Another concern is inflation. Georgieva said disinflation has stalled in many countries, while mounting fiscal pressures are pushing core government bond yields higher and increasing investor concerns about the interaction between fiscal and monetary policy.
She also said the longer-term effects of AI on productivity and financial stability remain uncertain.

IMF calls for policy discipline

Georgieva said central banks should remain focused on their price stability mandates, while governments need credible medium-term fiscal consolidation plans.

Structural reforms should focus on reducing bureaucracy and removing domestic barriers that restrict economic growth, she said.
“Stronger potential growth would help address the fiscal problem, and addressing the fiscal problem would help lift growth prospects,” Georgieva said.

Developing economies face refinancing pressure

The IMF chief said the sovereign debt situation in emerging and low-income economies has gradually improved in recent years because of domestic reforms and international cooperation.

But progress has been uneven, and rising global interest rates have created renewed pressure.

Higher yields in advanced economies are lifting borrowing costs across global markets, Georgieva said, in some cases more than offsetting the lower risk premiums that emerging economies have achieved through improved economic policies.

High refinancing requirements and rising debt-servicing costs are restricting the ability of many developing economies, particularly low-income countries, to spend on infrastructure, health and education.

That threatens long-term economic growth and can further undermine debt sustainability, she said.

Developing economies are also facing a sharp decline in net external financing, including reductions in official development assistance and significantly lower inflows from non-Paris Club creditors.

Pakistan cited as example of IMF approach

Georgieva said helping countries create fiscal space for growth-enhancing investment has become increasingly urgent.
She outlined three priorities for addressing developing-country debt challenges.

First, countries with unsustainable debt need decisive restructuring, supported by further improvements in international debt-resolution mechanisms. Georgieva highlighted progress under the G20 Common Framework, including the G20 memorandum of understanding template agreed this year.

She also pointed to work by the Global Sovereign Debt Roundtable, including an updated “Restructuring Playbook” published in April and clarifications intended to improve the application of comparability of treatment and coordination among creditor groups.

The IMF will continue working on solutions for countries that are not eligible for the Common Framework, including through greater use of its “good offices,” she said.

Second, Georgieva called for faster implementation of the IMF-World Bank Three-Pillar Approach for countries with sustainable debt that are pursuing strong growth-oriented reforms.

The IMF and World Bank have expanded assistance for reform implementation and domestic revenue mobilization and are exploring ways to encourage more effective liability management operations and attract larger private-sector inflows at lower borrowing costs.

Georgieva said the approach had worked well in countries including Ecuador and Pakistan.

Support from bilateral creditors and other international partners will be essential, she said, calling on the G20 to take a leadership role in supporting growth and investment.

Third, Georgieva said there was “no substitute for sound economic fundamentals,” stressing the need for greater debt transparency, stronger debt-management capacity and improved relationships between borrowers and investors.

Global imbalances widen sharply

Georgieva also warned that excessive global economic imbalances widened significantly in 2025.

The IMF’s latest External Sector Report found that excess global imbalances — those not explained by underlying economic fundamentals — widened by 0.7 percentage points of global GDP, marking the largest increase in a decade.

The widening was broad-based, with major contributions from the world’s two largest economies, she said.

Large imbalances can signal uneven economic growth and macro-financial vulnerabilities and can contribute to cross-border spillovers, trade tensions and economic fragmentation.

The IMF said sustained rebalancing requires policy action in both surplus and deficit economies.

Surplus countries should pursue market-oriented reforms that boost domestic consumption, promote investment and strengthen growth, while deficit countries should undertake appropriate fiscal consolidation to raise national savings and rebuild fiscal buffers.

Coordinated and mutually reinforcing policies among major economies would produce the strongest outcomes for global growth, Georgieva said.

The IMF is also working to improve cross-country economic data and external-sector statistics, refine its External Balance Assessment methodology and expand analysis of the relationship between trade policies, industrial policies and current-account imbalances.

Through its Comprehensive Surveillance Review, the Fund aims to provide a more forward-looking assessment of country-level external vulnerabilities and cross-border spillovers.

“The goal is to move from diagnosis to action,” Georgieva said.