NEW YORK, NEW YORK – SEPTEMBER 22: International Monetary Fund Managing Director Kristalina Georgieva speaks on stage at “Semaphore: The Next 3 Billion” at Conven on September 22, 2026 in New York City.
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SINGAPORE — The technology that investors and governments are counting on to boost the global economy is also adding pressures that threaten growth, the International Monetary Fund chief said, calling on policymakers to stop delaying tough choices on debt.
Managing director Kristalina Georgieva told an audience at an event in Singapore on Wednesday that artificial intelligence is “rapidly emerging as a key driver in determining the relative fate of countries in the global economy.”
But the triple forces of advances in AI, soaring energy costs and record public debt are challenging this decade’s already “overwhelming” growth.
“Love it, hate it or fear it, AI is here,” Georgieva said.
pulled in two directions
Speaking ahead of a series of IMF and World Bank annual meetings starting next week, Georgieva said the global economy is being pulled in two directions simultaneously: a “negative energy supply shock” from the Gulf War, which is now in its eighth month, and a “positive demand shock” from the AI investment boom. The combined impact is “very uneven around the world,” she said.
On a positive note, global AI investment as a share of GDP will reach, and likely exceed, the amount spent building railways, power grids, and communications networks. AI hardware and related technology products already account for more than a tenth of global merchandise trade, she said.
The IMF estimates that if properly leveraged, AI could increase global annual growth by up to 0.5 percentage points. “Going from 3% to 3.5% in 10 years is like adding an economy the size of ASEAN to the global economy,” Georgieva said.
However, the benefits are likely to be highly concentrated. The boom has largely bypassed economies that are less involved in global AI supply chains, she said, “increasing the risk of widening economic inequality around the world.”
The boom also fuels inflation concerns that haunt policymakers from the United States to Europe to Asia. “The AI construction boom is inflationary,” she said, as are energy and food shocks, tariffs and defense spending.
As the conflict in the Middle East drags on and there is little sign of an improvement in diplomacy, oil prices remain above $100 per barrel. Retail diesel prices also rose to record highs as refining capacity squeezed energy supplies.
That inflationary pressure is flowing directly into bond markets, as bond yields in the United States, Germany and Japan have risen to their highest levels in decades. Georgieva said that while long-term private debt issuance by AI-related borrowers has ballooned, competing with governments for capital, some of the increase may reflect expectations for faster growth.
debt problem
Ms Georgieva said global public debt was near its highest level since World War II and on track to soon exceed 100% of GDP, with developed countries being the “worst perpetrators”. For 17 years, the government “lived relatively comfortably” because interest rates were lower than growth rates. “Rising interest rates have put an end to this.”
He said the differential between interest rates and growth rates was currently “quite unfavorable” and “will rise further in the coming years,” meaning the growth rates needed to lower the debt ratio without fiscal effort “will not be achievable in the short term.”
This strain is already visible in Europe, where spreads on German government bonds have widened not only in France and Italy, but also in Ireland and Portugal, which have reduced their debt and deficits after the eurozone crisis.
“Fiscal space is calling for replenishment,” Georgieva said after a series of shocks ballooned public debt and left most countries’ budget deficits above their pre-pandemic averages.
AI risks are underestimated
Georgieva also pointed to the financial stability risks of the AI boom itself. Strong corporate earnings are boosting stock prices and wealth effects, he said, but “on the downside in earnings, hyperscalar leverage and large and growing global U.S. equity holdings could turn disappointment into a widespread shock.”
Citing Amara’s law that people overestimate new technologies in the short term and underestimate them in the long term, he said: “Somewhere in the transition between today’s boom in AI construction and the arrival of tomorrow’s AI benefits, we will pass through a period of greatest risk.”
Georgieva said the first line of defense is regulation and supervision. “Now may be a good time for many countries to become more cautiously hawkish in their monetary policy,” he said.
