IMF Chief: AI Becoming Core Driver of Countries' Global Economic Standing

IMF Managing Director Kristalina Georgieva said on October 7 at an event in Singapore that artificial intelligence is rapidly becoming a core driver of countries' relative positions in the global economy, while also posing risks to growth and financial stability.

Georgieva noted that AI development, surging energy costs, and record public debt are together weighing on an already sluggish decade of growth. She described the ongoing conflict in the Gulf as a negative energy supply shock and the AI investment boom as a positive demand shock, with their combined effects highly uneven across the world.

She said global AI investment as a share of GDP is set to match or even exceed past investment in railways, power grids, or communication networks. AI hardware and related products now account for more than one-tenth of global goods trade. The IMF estimates AI could add up to 0.5 percentage points to annual global growth if deployed well.

However, Georgieva warned the gains could be highly concentrated, largely bypassing economies not deeply integrated into global AI supply chains and widening global inequality. She also said the AI infrastructure boom has inflationary effects, with energy and food shocks, tariffs, and defense spending also pushing up prices. Bond markets have felt the pressure, as yields on U.S., German, and Japanese government debt hit multi-decade highs.

Georgieva said global public debt is near its highest level since World War II and will soon exceed 100% of GDP, with advanced economies hit hardest. The era of high interest rates has made it harder to reduce debt through growth alone. She urged policymakers to make difficult choices on debt without further delay. She also cautioned that the AI boom carries financial stability risks, as a shortfall in big tech earnings could trigger broader shocks, and suggested monetary policy in many countries should remain prudently tilted toward tightness.