The energy crisis sparked by the war in the Middle East remains the biggest risk for the global economy, but investment in artificial intelligence provides grounds for optimism, the International Monetary Fund has said, expecting global growth of 3.4% next year.
“The global economy has been resilient, but that resilience is reaching its limits, so we need to move from just coping to rebuilding,” the institution’s chief economist, Silvana Tenreyro, told the media, as quoted by Reuters. “We need to restore fiscal space. We need to rebuild supply-side resilience,” Tenreyro also said.
The Middle East war has fueled inflation through soaring prices for energy commodities that are spilling over the broader economy. However, government action to cushion the blow has worked to curb the risks of major pain, according to another IMF official. IMF deputy research director Petya Koeva Brooks told Reuters in an interview that measures such as oil reserve draws and diversification of suppliers have had an effect, helped by demand destruction due to the higher prices.
Countries that are active in the AI space have a better outlook than those that are not, according to the IMF. The lender noted especially countries involved in AI hardware development, including South Korea, Malaysia, Thailand, and Mexico. The U.S. economy will also get support from AI exposure, and so would European economies in the EU, according to the IMF.
On the other hand, countries most vulnerable to the effects of the energy crisis are facing difficult times. According to the IMF, Saudi Arabia will book a GDP contraction of 3.3% this year, which is a serious downgrade from an earlier forecast, which saw the kingdom’s economy grow by 1.7%.
Other Gulf states are also struggling, with the institution seeing Iran, Iraq, Kuwait, the UAE, and Qatar all post GDP contractions this year, with Iraq, Kuwait, and Qatar faring especially badly, with contractions of above 15%.
By Irina Slav for Oilprice.com
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