{"id":11658,"date":"2026-10-27T03:44:23","date_gmt":"2026-10-27T03:44:23","guid":{"rendered":"https:\/\/sotnews.agency\/?p=11658"},"modified":"2026-10-27T03:44:23","modified_gmt":"2026-10-27T03:44:23","slug":"governments-cant-take-their-resilience-for-granted","status":"publish","type":"post","link":"https:\/\/sotnews.agency\/?p=11658","title":{"rendered":"Governments can’t take their resilience for granted"},"content":{"rendered":"
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Somewhat unexpectedly, the global economy has weathered the challenges of the past few years extraordinarily well. Following the pandemic, shock followed shock \u2014 Russia\u2019s war on Ukraine, Washington\u2019s rejection of rule-based liberal trade, then most recently the war with Iran. Any one of these might\u2019ve led you to expect a severe economic setback, let alone all three combined. Yet global output kept on growing.<\/p>\n

The International Monetary Fund\u2019s new World Economic Outlook grapples with this puzzle \u2014 and sounds a warning that governments would be wise to heed. The system\u2019s resilience has indeed been impressive, but there are limits.<\/p>\n

Steady growth against the odds has surprised the IMF\u2019s economists as much as anyone: They\u2019ve underestimated year-ahead global growth in every annual forecast since 2023. They currently expect output to expand by a respectable 3.1 percent this year and 3.4 percent in 2027, noting that some countries are doing better than others. The pattern has shifted in favor of those, like the U.S., with two key characteristics: limited exposure to the energy-price shocks caused by the conflict with Iran and maximum exposure to the rise in demand driven by investment in AI-related goods and infrastructure.<\/p>\n

There are lessons for policy in both sources of resilience.<\/p>\n

More efficient use of clean energy isn\u2019t just vital for the sake of the environment; done right, it also makes economies stronger in other ways. Diversification from fossil fuels to renewables has greatly reduced dependence on oil. And the world uses much less energy per unit of gross domestic product than it did, for instance, in the 1970s, when oil-price shocks wreaked economic havoc. In addition, thanks to more sophisticated supply chains, buyers and sellers of energy now adjust more flexibly to oil-price hikes. Although the closure of the Strait of Hormuz blocked a route carrying a quarter of the global maritime trade in oil, supplies were quickly rerouted and inventories drawn down, softening the impact.<\/p>\n

Energywise, the boom in AI threatens to be a mixed blessing. As the technology rolls out, it will require vast amounts of energy, and the potentially enormous offsetting benefits of greater productivity and efficiency (including in the use of energy) are still speculative. Even if AI raises long-term growth rates, as seems likely, it may fail to justify investors\u2019 recent exuberance \u2014 conceivably pushing its short-term growth-boosting effects into reverse.<\/p>\n

The risk of a setback driven by a more sober appraisal of artificial intelligence (AI) investment, perhaps amplified by financial fragility due to excessive private debt, underlines another policy prescription: Governments need to restore their ability to support their economies should the need arise. At the moment, their capacity to respond to downturns with strong fiscal stimulus \u2014 as they did during the pandemic \u2014 is in doubt.<\/p>\n

Far from reining in borrowing after COVID, many governments let deficits keep growing. In many cases, countries with historically high ratios of public debt are discussing how to stabilize those burdens rather than how to reduce them. Others, notably the U.S. (which is running a deficit of 6 percent of GDP despite moderate growth and full employment), are ignoring the subject altogether. Bear in mind as well that demographic pressures and the need to spend more on defense are certain to compound the problem.<\/p>\n

Consider the recent rise in global bond yields a red flag. Across the globe, fiscal capacity \u2014 an indispensable component of economic resilience \u2014 is stretched to the limit. Before it\u2019s tested again, governments need to spend less, collect more revenue and restore their ability to act.<\/p>\n

This editorial was published by Bloomberg and distributed by Tribune Content Agency.<\/span><\/em><\/p>\n

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Somewhat unexpectedly, the global economy has weathered the challenges of the past few years extraordinarily well. Following the pandemic, shock followed shock \u2014 Russia\u2019s war on Ukraine, Washington\u2019s rejection of rule-based liberal trade, then most recently the war with Iran. Any one of these might\u2019ve led you to expect a severe economic setback, let alone…<\/p>\n","protected":false},"author":1,"featured_media":11659,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":{"facebook_2277560469115098_106292521332774":"","twitter_aToxNzczMzI3Njk4OTg4ODUxMjAxOw==_1773327698988851200":""},"rop_publish_now_history":[],"rop_publish_now_status":"pending","_monsterinsights_skip_tracking":false,"_templately_pack_id":"","_templately_imported_at":"","_templately_source":"","_templately_import_session_id":"","footnotes":""},"categories":[16,14],"tags":[],"class_list":["post-11658","post","type-post","status-publish","format-standard","has-post-thumbnail","category-korea","category-trending-news"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t