IMF Chief Warns AI Boom and Debt Threaten Global Economy

International Monetary Fund Managing Director Kristalina Georgieva warned on Wednesday that the global economy is caught between a positive demand shock from the artificial intelligence investment boom and a negative energy supply shock caused by an eight-month war in the Gulf. Speaking in Singapore and ahead of the IMF and World Bank Annual Meetings in Bangkok, Georgieva noted that while AI could add up to 0.5 percentage points to annual global growth, the benefits are concentrated among a few economies and risk widening inequality.

Georgieva cautioned that the AI building boom is inflationary, with AI hardware now accounting for over 10% of world goods trade. She warned that if AI companies fail to deliver the productivity gains required to justify their valuations, the leverage of AI hyperscalers could trigger a far-reaching financial shock.

Simultaneously, the IMF chief highlighted a critical debt crisis, stating that global public debt is near its highest level since World War II and is projected to exceed 100% of GDP by 2030. She identified advanced economies, specifically the United States, as the worst offenders. Georgieva urged governments to stop delaying difficult fiscal choices and supported recent rate hikes by the US Federal Reserve, the European Central Bank, and the Bank of Japan as appropriate responses to persisting inflation.