COLOMBO (News 1st); - International Monetary Fund (IMF) Managing Director Kristalina Georgieva has warned that the global energy shock remains a major threat to the world economy, cautioning that elevated fuel prices, supply constraints and geopolitical risks could continue to drive inflation and economic uncertainty well into 2027.
Speaking in Singapore on the latest developments in global energy markets, Georgieva said the impact of the energy crisis has so far remained significant but largely contained due to a combination of improved energy efficiency, diversification of fuel sources, strategic reserve releases, flexible supply chains and normal market-driven adjustments in supply and demand.
However, she noted that despite some recovery in energy flows from the Gulf region, oil prices continue to hover around the US$100-per-barrel mark, reflecting ongoing risks, elevated transportation costs and broader market uncertainty.
According to the IMF chief, the situation is being compounded by a severe shortage in global refining capacity, which has significantly increased the spread between crude oil and refined fuel products.
As a result, retail prices of diesel and other refined fuels have climbed to record highs in many parts of the world.
Georgieva also highlighted concerns over natural gas supplies, saying gas exports from the Gulf remain heavily constrained due to limitations on liquefied natural gas transport routes while shipping through the Strait of Hormuz continues to face security concerns.
She warned that the impact of these disruptions is not being felt equally around the globe, with Asia and Europe among the regions most affected by rising energy costs and supply challenges.
Drawing attention to seasonal demand pressures, Georgieva cautioned that energy markets could face further strain in the months ahead as countries begin replenishing reserves and heating demand increases with the arrival of winter in the Northern Hemisphere.
Quoting the popular television series Game of Thrones, she remarked that "winter is coming," stressing on concerns that energy prices may rise further before stabilizing.
Even if tensions in the Gulf region ease in the near future, Georgieva said the problem of elevated energy prices is unlikely to disappear quickly.
She pointed to market forecasts showing that Brent crude prices are expected to remain elevated through 2027, suggesting that energy costs could continue to weigh on households, businesses and governments for years to come.
The IMF Managing Director also warned that persistently high energy prices are feeding directly into inflationary pressures across the global economy.
According to Georgieva, rising energy costs are contributing to higher inflation, pushing central banks to maintain elevated interest rates and placing upward pressure on government borrowing costs and benchmark yield curves.
