The world economy has weathered the energy shock caused by the disruption of shipping through the Strait of Hormuz better than expected, but it is not over yet, said Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF).
“So far, the world economy has weathered the energy shock caused by the closure of the Strait of Hormuz better than expected, thanks to a number of factors“, Reuters quoted Georgieva as saying.
She pointed to the use of fuel reserves by several countries, lower overall energy demand, increased production of renewable energy and the expansion of coal-fired power plants in some regions. She also mentioned investments in the United States and other countries in artificial intelligence projects that support corporate turnover and consumer demand.
However, Georgieva called for continued vigilance, noting that oil prices have remained high since mid-June, although far from the peaks seen at the height of the crisis in the spring. “The energy shock is not yet over. A new surge in oil prices could accelerate inflation, forcing central banks to maintain containment policies, which could further affect debt service costs and economic activity“, the IMF chief added.
She stressed that governments around the world must address financial problems and “formulate and present credible plans on how they plan to ensure debt and deficit sustainability“. As the agency notes, Georgieva did not specifically mention any countries, but her comment came after U.S. Treasury yields hit a 19-year high last week.