Global economic risks overshadow IMF-World Bank talks in Bangkok

Financial officials from around the world are preparing to meet in Bangkok for the 2026 Annual Meetings of the International Monetary Fund (IMF) and the World Bank from October 12 to 18, as geopolitical tensions, rising energy costs and mounting public debt threaten already fragile global economic growth.

The meetings come as the US-Israeli war against Iran enters its eighth month, having triggered the largest disruption to global energy supplies on record. Higher interest rates and persistent inflation are adding to the economic strain, making the conflict's financial consequences a central concern for policymakers.

This year's gathering marks the first time in three years that the institutions have held their annual meetings outside Washington.

One notable absence is US Treasury Secretary Scott Bessent, who is unable to attend because of domestic commitments.

Energy crisis and extreme weather threaten growth

World Bank President Ajay Banga has warned that several economic pressures are converging, potentially undermining the resilience that the global economy has demonstrated since Iran closed the Strait of Hormuz.

Speaking to Reuters, Banga acknowledged that the global economy had performed better than initially feared following the closure of the strategic waterway. However, the outlook is becoming increasingly uncertain as diesel and fertiliser prices climb, while a potentially extreme El Niño event poses additional risks.

Experts have warned that such an extreme weather event could contribute to as many as 450,000 heat-related deaths worldwide.

In response to the energy crisis, the Group of Seven (G7) countries have agreed to release 100 million barrels of diesel and crude oil from emergency reserves.

The decision follows pressure from US President Donald Trump, who wants to bring down petrol prices ahead of November's congressional elections, in which his Republican Party could lose control of Congress.

Despite the mounting challenges, Banga confirmed that the World Bank had not yet lowered its global economic growth forecasts, but was closely monitoring developments.

He emphasised that the greatest concern was not El Niño alone, but the simultaneous pressures arising from expensive fertilisers, higher energy costs and mounting debt.

These overlapping challenges, he explained, could create more serious economic difficulties than any single factor acting independently.

Banga consequently urged governments and international institutions to adopt a more cautious approach and strengthen their preparations for potential disruptions in the months ahead.

IMF warns of mounting economic uncertainty

IMF Managing Director Kristalina Georgieva has delivered a similar warning ahead of the Bangkok meetings, cautioning that further economic difficulties may be approaching.

"Winter is coming," she told an audience during a speech outlining the institution's expectations for the global economy.

The IMF has indicated that its forecast for global economic growth of approximately 3% in 2026 is unlikely to change significantly, while its projection for 2027 could be revised slightly upwards.

Nevertheless, the outlook is less favourable for countries directly affected by geopolitical conflicts.

Ukraine, now in the fifth year of defending itself against Russia's invasion, is among the economies facing possible downward revisions. Several Gulf countries could also experience weaker growth following Iranian attacks and sharp declines in energy exports.

Research released by the IMF on October 6 highlighted another growing problem: sharp increases in food and energy prices are becoming more frequent triggers of economic crises. Such price shocks can raise inflation expectations and keep them elevated for longer, deepen poverty and undermine economic stability.

Public debt reaches critical levels

A further concern for policymakers is the rapid accumulation of government debt, which is restricting economic growth and intensifying inflationary pressures.

According to the IMF, global public debt has reached its highest level since the Second World War and is expected to exceed 100% of gross domestic product (GDP) by 2030.

Advanced economies, particularly the United States, account for the highest debt-to-GDP ratios. However, emerging markets and low-income countries face greater vulnerability because they must contend with several economic pressures simultaneously.

Emerging markets and low-income countries also face capital outflows as investors seek higher interest rates in the United States.

These challenges are being compounded by the potential effects of El Niño and insufficient investment in artificial intelligence (AI).

While AI investment has helped cushion the effects of supply disruptions in the United States and other wealthy economies, many developing countries have not benefited to the same extent.

Developing countries face rising borrowing costs

Debt repayments represent an increasingly serious problem for developing economies, particularly those seeking to refinance existing debt at higher interest rates.

Across developing countries, interest payments already consume more than 10% of government revenue on average, limiting the resources available for public services and economic development.

During the early stages of the Covid-19 pandemic, leaders of the Group of 20 (G20) agreed to suspend debt repayments for the world's poorest countries. However, there appears to be little enthusiasm for introducing a comparable arrangement now, with high debt levels and political pressures making international agreement more difficult.

Another contentious issue involves proposed changes to IMF lending conditions. Under the recommendations, countries seeking financial assistance would be required to implement fewer reforms, but those reforms would be more extensive and demanding.

Critics fear the changes could lead to harsher austerity measures, placing additional pressure on populations already experiencing economic hardship.

Iolanda Fresnillo, a debt justice campaigner at the European Network on Debt and Development (Eurodad), highlighted Kenya as an example of the political consequences of such policies.

Kenya managed to avoid restructuring its debt by reducing public expenditure and attempting to increase tax revenue. However, those measures provoked widespread protests, particularly among younger people, illustrating how attempts to restore financial stability can generate significant public opposition.

Security concerns add to the Bangkok meetings' challenges

Beyond the economic agenda, the escalating Middle East conflict is creating practical security concerns for participants travelling to Thailand.

International flight routes to Bangkok frequently pass through the Middle East, raising questions about travel safety following recent attacks at a Saudi Arabian airport.

These security concerns pose an immediate challenge for more than 10,000 international visitors expected to arrive in Bangkok, a city with approximately nine million residents.

The situation also reflects a broader shift in how global financial institutions must assess geopolitical developments.

The previous IMF-World Bank annual meetings held outside Washington took place in Morocco in 2023, shortly after Hamas-led militants carried out an attack in Israel that killed approximately 1,200 people.

Israel's subsequent bombardment of Gaza has resulted in more than 74,000 deaths and widespread destruction across the Palestinian territory.

At the time, many financial officials did not regard the initial Hamas attack as an issue with significant economic implications.

Three years later, however, the consequences of the conflict have demonstrated how closely international security and global financial stability are connected.

Geopolitical risks demand a different approach

Josh Lipsky, vice president of international economics at the Atlantic Council, believes the events of the past three years have fundamentally changed the environment in which financial policymakers operate.

He pointed to the extensive international consequences of the Middle East conflict and the direct connection between the events of 2023 and the current confrontation involving Iran.

The closure of the Strait of Hormuz, in particular, demonstrates how a regional security crisis can develop into a major disruption affecting global energy supplies, trade and economic stability.

Lipsky argued that policymakers could no longer afford to treat geopolitical conflicts as developments separate from financial and economic management.

Instead, they need to respond more quickly to emerging crises, anticipate potential consequences and adapt their policies to an increasingly interconnected international environment.

He stressed that decision-makers must recognise that the world in which they operate has changed fundamentally, making a proactive approach to geopolitical and economic risks more important than ever.