International Monetary Fund (IMF) Managing Director Kristalina Georgieva has urged the governments to “take spirited measures” to confront their economic weaknesses in the face of the growing challenges in the global economy. In a meeting with reporters in Washington, she said that “trustworthy proposals” were needed to bring national debt and deficits on a “path to sustainability. In addition, Georgieva asked central bankers to stay “completely focused on their price stability mandates to deal with the sticky inflation.

However, the world economy has proven to be very resilient to inflation and to trade tensions, Georgieva said, despite these headwinds. She said that much of this economic sustainability was due to high investments in artificial intelligence (AI). She did note, however, that overall uncertainty is still high, citing increases in bond yields and the absence of any significant headway in reducing global inflation.

The current world situation is characterised by rival economic power players. It was a “tug of war” between a positive demand shock from the innovation of AI and a negative energy supply shock from the ongoing conflict in the Middle East, Georgieva said. She pointed out that the energy shocks stemming from the war in Iran have by no means ended and will have a negative impact on the overall economy.

The intricate factors will be prominently on the agenda during the IMF’s annual meetings in Bangkok this October. In this forum, the global lender would be expected to issue its next broad-based review of the global economy and to comment on such intertwined fiscal issues.

The IMF’s global growth projection, at 3%, remained largely the same as its July prediction. The fund, however, raised its projections for consumer prices in the world due to rising energy and food prices. The costs are further compounded by a number of upcoming challenges, such as diminishing oil and gas supplies as the Northern Hemisphere turns to winter, Georgieva said. She also cautioned for a severe El Niño weather pattern that could adversely affect global food security, in addition to the volatile effects of AI’s lightning-fast adoption on financial stability overall.