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Countries, both rich and poor, must take faster action to cut debt and counter growing inequality as their economies weather a triple whammy from the artificial intelligence boom, heavy borrowing, and shocks from wars in the Middle East and Ukraine, the head of the International Monetary Fund (IMF) said.
“Some very tough political choices stare us in the face,” IMF Managing Director Kristalina Georgieva said in a speech in Singapore ahead of autumn IMF-World Bank meetings that were held in Bangkok.
At the meetings in Bangkok, finance ministers and central bank governors of 191 IMF-World Bank member countries assessed the state of the world economy and discussed strategies to support financial stability and sustained growth.
So far, the hardest recent hits to global well-being have come from conflicts in the Middle East, Ukraine, and elsewhere, Georgieva noted.
But excessive debt is a growing burden for wealthy countries such as the U.S., Japan, and Germany, as well as low-income countries that must choose between spending on public welfare or repaying onerous loans at a time of high interest rates, she noted.
Georgieva pointed to risks associated with the rapid buildup of data center capacity to deliver artificial intelligence, which has helped push stock prices in many places to record highs, supporting strong economic growth despite high energy costs due to the Iran war.
Investments in AI are likely to exceed the relative scale of spending on building railroads, electricity grids, and telecommunications networks.
“Love it, hate it, or fear it, AI is here, rapidly becoming a key driver of countries’ relative fortunes in the world economy,” she said.
The AI building boom is underpinning robust corporate earnings as well as higher inflation. But there is a lag between the heavy investments involved and the arrival of AI’s benefits, Georgieva said.
“Should earnings fall short,” she said, “hyperscaler leverage and large and growing global holdings of U.S. equities could turn a disappointment into a far-reaching shock.”
“Should earnings fall short,” she said, “hyperscaler leverage and large and growing global holdings of U.S. equities could turn a disappointment into a far-reaching shock.”
This article was provided by The Associated Press.