Protect People, Not Prices, Says IMF Chief

COLOMBO (News 1st); International Monetary Fund Managing Director Kristalina Georgieva has warned that the global economy is being shaped by two powerful and opposing forces, with the ongoing conflict in the Middle East driving up energy prices while the rapid expansion of artificial intelligence is boosting economic activity and investment.

Speaking on the global economic outlook, Georgieva said the war in the Middle East has triggered an energy supply shock that is weighing on economies worldwide, while rising demand linked to artificial intelligence is providing a significant boost to growth in technology-driven economies.

As a result, global growth is projected at approximately 3.1% in 2026, unchanged from earlier forecasts but lower than the 3.4% growth recorded last year.

The IMF chief said the impact of these developments is not being felt equally. Countries closely linked to the artificial intelligence supply chain, particularly in Asia, are benefiting from increased demand and investment. She highlighted Thailand, Malaysia, South Korea and Singapore among the economies seeing gains from the global AI boom. Energy-exporting nations that have avoided direct exposure to conflicts are also performing relatively well.

However, Georgieva warned that low-income countries, fragile states and conflict-affected nations are facing the greatest difficulties. Economies dependent on imported energy and those excluded from the technology boom are bearing the brunt of rising costs and slower growth.

In what she described as the IMF's strongest message to policymakers, Georgieva called on governments to urgently strengthen their public finances before economic pressures worsen. She urged authorities to improve revenue collection, better manage public spending and enhance financial governance.

With food and energy prices continuing to climb, Georgieva stressed that governments should focus on protecting people rather than attempting to artificially control prices. She advocated temporary and targeted support for vulnerable communities while allowing market signals to function normally.

The IMF Managing Director also urged central banks to remain firmly committed to controlling inflation, particularly in countries where price pressures remain elevated and economic activity remains strong.

On artificial intelligence, Georgieva said the technology offers enormous opportunities to boost productivity, improve living standards and support future prosperity. However, she cautioned that the rapid adoption of AI is also creating new risks.

She warned that AI-enabled cyberattacks have already become a reality, citing recent incidents that demonstrate how emerging technologies can disrupt critical systems. Such attacks, she said, could increasingly target financial institutions and essential infrastructure, posing a growing threat to economic and financial stability.

Georgieva called on governments, regulators and financial institutions to strengthen cyber resilience and address risks associated with the growing concentration of technology systems, warning that geopolitical tensions, cyber threats and economic uncertainty will remain key challenges for the global economy in the years ahead.