Faisal Islam: What I learned from a week with the world’s top finance leaders
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When it comes to the future direction of the global economy there is a bit of a tug of war going on.
There are starkly opposing forces. On the one hand holding back growth are the familiar, recurring crises from the energy shock, trade conflict and actual war. This is reflected most clearly in the sharply rising interest rate costs for the world’s advanced economies.
Pulling in the other direction is the boost from massive spending on AI, and the frankly astonishing resilience shown especially by smaller economies, as new routes for trade, including for oil and gas, have been established out of necessity.
At the IMF meetings in Bangkok this week these themes came up again and again, including among those at the very top table. But not even they know which way things are going to go.
In the meantime it’s a sportsman’s bet where the roving eye of the bond markets will focus next. Currently they seem to be looking at the US and France.
However, the French finance minister, Roland Lescure, has been telling the world he has had no problem selling debt, though it was more expensive, and that his Budget would be fine. He also suggested he had helped save the G7 group of advanced nations, which was at risk of collapsing a year ago amid Donald Trump-inspired tensions.
In some ways it is a miracle there has not been a global recession, or a debt crisis in a major emerging economy. Indeed the Thai finance minister was boasting to me of how little his borrowing costs had gone up, especially in relation to the US.
Another surprise is the UK being taken off the bond markets’ naughty step, and instead being named model pupil by the IMF. The IMF has taken the government’s Budget plans at face value and on trust. The reality is that the rest of the G7 lack even this. And beauty is relative, especially when it comes to borrowing.
And this moment gave Chancellor John Healey the chance of a hearing, to highlight that the UK’s actual growth data has continued to outperform expectations and so far in 2026 can now be described as strong. Healey told me that he saw the figures as the first sign that AI and tech investment was starting to increase UK economic growth. The bond financiers milling around the IMF meetings seem to be taking another look at the UK after years of crisis.
But there is a third big challenge to wrestle with, on top of geopolitical instability and bond market uncertainty, one that’s apparent even on the streets of Bangkok, as the chauffeurs dropped off the bankers and finance ministers for this week’s gathering.
Like other nations Thailand has experienced first hand the astonishing boom in sales of Chinese electric vehicles. Thailand is sometimes dubbed the “Detroit of Asia” for its own strong car making heritage. Now nearly a third of all car sales are Chinese EVs.
It is the clearest example of what is known as the China Shock Two. The sheer speed of China’s dominance in advanced manufacturing. The first China shock came in the 2000s in basic manufacturing.
This second wave of dramatic change has led in just the last few months to a reappraisal of how world trade is functioning and how it is going to be managed. This is especially the case in the EU, which is scrambling to reassess what currently feels like a one-way street when it comes to China-Europe trade.
The extra “Made in Europe” protections that the bloc is drawing up will have a profound impact on the UK too. If the UK is outside the new rules, China could divert its excess car production to the UK, where, like Thailand, there are currently lower tariffs and even subsidies. Or the EU could invite Britain in, but ask it to follow its suit by raising tariffs to match its own.
Then there is the sub-plot of the UK’s relationship with the European Union. This was a theme that cut through more than might have been expected in Bangkok this week and even seemed to provide a little entertainment. The managing director of the IMF Kristalina Georgieva rolled with laughter, suggesting the Brexit “divorcees are now dating again”. The Finnish finance minister told me the UK was “flirting” with the EU. Major banks were issuing reports about the prospect of “Breturn”.
It is, however, the AI boom that is being relied on to provide the trampoline that is required to bounce the world economy out of its current era of multiple simultaneous crises, so many of which are linked to the decisions of President Trump.
But even that is not clear cut. In one room the transformative economic effect of AI is lionised by finance ministers. In the next, central bankers fret about its power to break the cybersecurity of most of the banking system. The financial boom around it can’t last. The masters of the financial universe are just thankful that it has so far.
UK economy
Economy
International Monetary Fund (IMF)
John Healey
Economics
