IMF warns of AI boom, energy shock and debt risks facing global economy
New Delhi, Oct 7 (UNI) Governments around the world need to take urgent steps to manage growing risks from the uneven artificial intelligence (AI) investment boom, persistent energy disruptions and rising public debt, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Wednesday.
Speaking ahead of next week's IMF-World Bank meetings in Bangkok, Georgieva warned that the global economy is facing several inflationary pressures at the same time. These include rapid AI-related investment, higher energy and food costs, tariffs, increased defence spending and elevated government debt. She urged central banks to maintain a "prudently hawkish bias", signalling that policymakers should remain cautious about easing monetary conditions while inflation risks persist.
According to Georgieva, the rapid expansion of AI investment is providing a significant boost to economic activity, but the gains remain concentrated in a relatively small number of countries. The investment surge has helped push financial markets higher and supported record exports from major Asian producers of semiconductors, computing equipment and other AI-related products.
However, Georgieva cautioned that economies outside the AI supply chain risk receiving far fewer benefits from the boom. She also highlighted the possibility that increased AI adoption could widen income and wealth disparities between countries. Energy shock adds to inflation risks Geopolitical conflicts and disruptions to commodity supplies are expected to keep energy markets under pressure into 2027, Georgieva said.
She described the current energy shock as significant but still manageable, while warning that price pressures could intensify as demand increases during the Northern Hemisphere winter and countries move to rebuild depleted reserves. The growing electricity requirements of data centres and AI infrastructure are adding another layer of pressure to global energy demand. Governments are also confronting a tougher fiscal environment as borrowing costs rise. Global debt has climbed beyond $365 trillion, according to the Institute of International Finance, while bond yields in major economies have reached multi-decade highs.
Georgieva said advanced economies have been among the biggest contributors to the build-up in public debt and now face difficult decisions over government spending and fiscal deficits.
She noted that policymakers benefited for years from an environment in which interest rates remained below the pace of economic growth. That advantage has now disappeared as borrowing costs have increased. Tough choices ahead The IMF chief said governments that have become accustomed to large fiscal deficits will need to make politically difficult choices as financing costs remain elevated. With AI investment supporting growth while energy disruptions, trade measures, defence spending and debt create inflationary risks, policymakers face a delicate balancing act between sustaining economic expansion and maintaining price stability.
The warnings come as finance ministers and central bank governors prepare to gather in Bangkok for the annual IMF-World Bank meetings against a backdrop of heightened volatility in global bond and commodity markets.
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