The Global Outlook, with the IMF

Good morning everyone. Um I'm happy to be here today at the Abu Dhabi Finance Week. My job this morning is to update you on the state of the global economy. Um as we are at the end of the year, let's start with how we are ending 2025. 2025 was a kind of a tale of two cities.

It's a year of shocks but also year of resilience. Year of uncertainty but also year of bullishness in terms of investment. Let's go over it very quickly. First of all, the first shock was the trade shock and the global economy remained resilient uh after the raising tariffs and this is thanks to two things. the flexibility in trade uh and trade rules h have adjusted very quickly to the trade shock and the second is uh uh the frontloading of trade operations prior to April prior to uh uh the implementation of the trade uh trade tariffs.

The second important issue to look at is did the trade shock affect inflation. And the good answer here is that inflation inflationary impact of higher tariff has been relatively muted um against all odds. And on the other hand, the economy showed strength and resilience thanks to the increase in investment in AI globally and especially in the US. The third salient impact is what happened in the global financial arena. Global financial conditions remained accommodative and we saw uh strong appetite of capital flow moving to emerging economies in particular to the Mena uh region where the number of transactions the size of the issuance in the international capital markets was twice higher than what we saw in 2024 and the amount of flow flow that came to the region was strong.

In addition to that, we saw that spreads tightened even to uh a level that we did not see since the co shock in 2020. Where are we heading in 2026? And here I would like to focus on four areas. One, what will happen to trade? Clearly um I think what we will expect that trade will stabilize will slow down but will remain strong.

On the other hand, we project that global uncertainty will still with us and uncertainty could hit you with time in certain cases, not only in the same year or the second year, two years after, it could have an impact on your economy and it could drag your economy lower by something that could reach 2% of GDP. Therefore, it's very important to remain vigilant and it's very important to watch how this uncertainty will impact the economies in the world as well as also in the region. AI, we are all witnessing the increase in investment in AI. We are all witnessing the increase in valuation. Yet we see that the level of risks in terms of asset is reaching one of the highest over the last three decades and we see kind of decoupling between the valuation and the price of assets uh in the technology arena and the rest of S&P.

Therefore, it's an area where we see a lot of promises but we have to be extremely careful. The other issue that we need to watch in 2026 is debt and the impact of the debt sustainability in advanced economy in the rest of the world including on emerging markets. As we see here, debt is getting more costly because uh spreads are increasing especially on the on the high end and the gross financing needs for advanced economies are ballooning in 2026. Any adjustment on that front will have an impact on emerging economies. Therefore, it's very important to watch how debt and debt management issues and the credibility of addressing the issue in advanced economies in the rest of the world.

The last point is technology and I would like to um focus on fintech something that is very relevant to our meetings this week. We are seeing rapid increase in stable coins. We are seeing new opportunities growing in this arena. Increase in payment efficiencies. Financial markets are getting uh um uh deepened by the development of those new technologies and we see also regional and global integration accelerated with that.

But there are c certain number of risks that we need to measure, we need to manage and we need to mitigate. What does it mean for the region? And I will conclude with that. How MENA will benefit and should address also the challenges of a very um I would say promising but highly uncertain global economy in 2026. First uncertainty tells us one important lessons.

time of uncertainty, build buffers and strengthen your policy frameworks in order to increase your credibility. Therefore, countries in the region need to maintain um I would say tight fiscal policy. We are expecting that to um slow down in the region. We are expecting fiscal situation to improve. In addition to that, countries who have buffers need to nurture them and to use them wisely in order to reduce any loss of credibility in the markets.

The second important issue is we are in a world of changes of in trade directions. The fragmentation is a risk but also could offer an opportunity to the region. And as we see here in this slide, trade has increased. Export from the region compared to the last few decades is growing and this comes with the increase in diversification of economies in the region and in particular in the Gulf and especially in the UAE. Therefore, accelerating export, increasing trade connection is an opportunity for the region to benefit from the increased level of fragmentation.

How to achieve that? by improving infrastructure, having the right policies and strengthening the trade cooperation and the trade agreements with the rest of the world. The third important dimension for the region is AI. Of course, AI is strategic sector especially to the GCC. It's in factly a gamecher and when we see the speed at which countries in the GCC are increasing their investment, building their capabilities and benefiting from three important factors.

Access to capital, access to ample energy and also access to talent. Therefore, increasing investment in AI, in technology, linking it to the different level of services and go beyond only producing uh uh AI is very important. Let me also uh end with an important dimension which is financial technology. Financial technology is one of the area that the region could benefit from especially the GCC. There is significant investment in the new technology and the good news is the level of readiness of the key markets the UEE the Saudi market is there.

What does it mean here? It means that technology in finance can can accelerate financial inclusion which will allow access to finance to become more ample and relevant but also could help deepen the financial markets. By deepening the financial markets, it will increase GCC integration and will make the GCC a region that is not only emerging as a middle power economically, benefiting from the new winds in terms of trade, in terms of investment, but become one of the key players, one of the key global connectors in trade, logistics, but also in finance. This is an opportunity that requires to keep improving on the regulation, strengthening the supervision and also address certain number of risks that could emerge with that. With that, I would like to thank you and I wish you all the best for this um Abu Dhabi finance week and all the best for 2026.

Thank you very much.