IMF chief warns global economy faces energy shocks, AI demand

The global economy faces dual pressures from a negative energy supply shock and a positive artificial intelligence (AI) demand shock, the head of the International Monetary Fund said on Wednesday.

Kristalina Georgieva delivered a speech in Singapore ahead of the upcoming annual meetings in Thailand, highlighting that the global economy must navigate three major crosscurrents, which are the rapid arrival of AI, persistently high energy prices and record levels of public debt.

She noted that global public debt tracks to soon exceed 100 per cent of the gross domestic product, reaching its highest levels since the end of World War II.

Advanced economies stand out as the worst offenders with some of the highest gross debt loads, Georgieva said.

The managing director pointed out that opposite forces pull the global economy in two different directions. Georgieva warned that oil prices remain around $100 per barrel due to transport costs and other risks.

She emphasised that natural gas supply from the Gulf remains severely impaired because shipping through the Strait of Hormuz faces threats. 

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On the technology front, Georgieva stated that AI hardware and related products now account for more than 10pc of world goods trade. She added that AI could eventually deliver up to 0.5pc of extra world growth annually if countries manage it correctly.

Georgieva urged economic policymakers to stop delaying necessary actions and implement credible fiscal consolidation plans. She also advised central banks in various countries to maintain a prudently hawkish bias in their monetary policies because the AI building boom, energy shocks and high public debt fuel inflation.