IMF Deputy Director Koeva Brooks Talks AI in The Middle East

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Dani Burger** (0:07)
The International Monetary Fund releasing its updated World Economic Outlook this morning. It's titled Global Economy and Cross-Currents of War and Technology.
The organization leaving its global growth forecast unchanged for this year from its forecast in April, that is. The global economy, it's saying, as a whole, has so far weathered the shock from the war better than feared. Joining us now is the woman behind the report, Petya Koeva Brooks, IMF Deputy Director of the Research Department. Petya, on a day like today, I have to ask you if you might be rethinking, perhaps, your conclusions if this kicks off again.

**Petya Koeva Brooks** (0:43)
Well, we do think that the global outlook is shaped by the forces of the war shock and also AI. What we're seeing with the most recent developments overnight is that there is, of course, still a lot of uncertainty remaining and risks are very high, which is why what we also emphasize is that overall we do see risks on the downside with the escalation of the conflict being a primary driver of those downside risks.

**Vonnie Quinn** (1:14)
Petya, when this conflict first broke out, many energy experts pointed to a worst case scenario where oil not only went to $100 a barrel, which it did get to, but continued to climb and maybe neared something like $200 a barrel. There were certainly calls for that, and we didn't live through those worst case scenarios. We're still trading under $80 a barrel this morning, even though we are moving higher. Has this made us rethink just the amount of damage this conflict closing the Strait of Hormuz can do to energy markets and thus this global economy?

**Petya Koeva Brooks** (1:46)
Well, what we have seen is indeed quite a lot of resilience and margins of adjustment within commodity markets. And just to be upfront about this, our baseline now is predicated on a forecast of oil prices at $89 per barrel in 2026 Yes, but you're right, when it started in April, we considered a variety of scenarios, including very high oil prices for several years. What's happened since then, in some ways, we could have seen a much larger shock if several forces hadn't been in play. One is the impact of the use of strategic reserves, which had played a role in order to mitigate that impact. But another important factor is that production increased outside the Gulf region. Importantly, oil demand also came down, especially coming from Asia.
Again, I think we were, Well, I think that many were perhaps surprised by the resilience of the market. And then the real question is, how long this resilience could last, because at least some of the mechanisms that were at play so far, including the use of reserves, may not be as viable of a tool going forward, given that now reserves have come to lower levels.

**Dani Burger** (3:16)
Well, exactly, Petya. I mean, I think why there was such relief in the market was because we didn't actually hit those tank bottoms, right? Those reserves did hold out, but if this all kicks off again, the strait closes up again, who knows what might happen? And you know, forecasts might have to change a lot. Now let's just baseline, say this is the forecast that, you know, that carries us through the next three months. What happened to all of the Southeast Asian countries and all of the oil importers that really desperately hurt even up to now?

**Petya Koeva Brooks** (3:46)
So that's where we really see a whole spectrum of outcomes and we have seen, indeed, the countries that were energy importers and that were not plugged in into the AI investment cycle are the ones that are experiencing worse outlook. But then there are those who are, even though they're commodity importers. I think that the focus is on the focus and career here comes to mind. We're actually upgrading their forecasts because again of the very, very strong impact of the strength of the exports in the tech sector that we saw in the first quarter of this year, and it's still ongoing.

**Vonnie Quinn** (4:30)
Well, one of the big risks to the downside that you flag is an AI correction. Are you viewing that in terms of just like personal wealth, considering what's happening in South Korea and the American equity markets, just how over indexed households right now are to the stock market and specifically AI trade? Or is it a risk for these hyperscalers themselves if you see something of a correction that CapEx pulls back in a serious way?

**Petya Koeva Brooks** (4:54)
So when it comes to AI, we do see the risks as two-sided. We've not incorporated any of the potential productivity gains that would come from AI in our forecast, and if we see faster adoption of AI, of course, this is something that we'll need to consider. But your question on the downside, I think... A lot of the activity that we've seen is indeed coming from investment and in the tech sector, AI related.