The global economy is under threat from an energy price shock, record public debt, and the AI investment boom, according to Kristalina Georgieva, the International Monetary Fund’s managing director. She stated that the world is being pulled in two directions: a negative energy supply shock from the Middle East war and a positive demand shock from artificial intelligence, which is also driving inflation higher.
Georgieva noted that the combined impact of these forces is highly uneven globally, with the AI boom bypassing many countries. Growing government debt is another concern, with advanced economies, particularly the United States, identified as having high debt-to-GDP ratios.
Oil prices have risen, with Brent crude up 0.66% to $101.19 a barrel and US crude 0.5% ahead at $89.86 a barrel. This increase is influenced by supply constraints from a storm in North American oil-producing regions and Houthi attacks on Saudi Arabia, balanced against higher oil supplies from the Middle East.
After a selloff last week, government bond markets rallied on Tuesday, leading to lower yields. French 10-year yields rose nearly 5 basis points to 4.796% today, while UK gilt yields are slightly down at 5.37%.