Research says global growth is holding up but debt risks are rising

In short: Major economies are still growing despite higher energy prices, but rising government debt and borrowing costs are becoming a bigger worry.

What's going on

Research for the Financial Times says the world economy is proving more resilient than many expected after the recent Middle East energy shock linked to Iran. Economic activity in places like the US, China, and India is still holding up, and the data points to solid growth this year.

The analysis also notes that higher spending tied to artificial intelligence is helping support growth, especially in the US tech sector. In Europe, Germany has done better than expected, helped by government spending on infrastructure and the military. France is described as weaker, with more concern about whether its public finances can stay on track.

But the same research warns of “worrying omens” behind the positive growth numbers. Oil prices rose above $100 a barrel after US-led attacks on Iran in February, which has added to inflation pressure. Inflation means prices rise, so everyday things cost more.

A second concern is government debt. Many countries have borrowed heavily, and investors have been selling government bonds, which has pushed up bond yields. A bond yield is basically the interest rate a government ends up paying to borrow money, like the rate on a loan. The report says borrowing costs have climbed to multi-decade highs in places including the US, France, the UK, and Japan.

What to watch

These concerns are expected to loom over this week’s IMF and World Bank meetings in Bangkok, where officials will discuss debt stress and risks linked to AI. The key issue is whether governments can keep supporting their economies while higher interest costs make their budgets tighter.

Source: Financial Times