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Countries, both rich and poor, must act faster to reduce debt, tackle widening inequality and regulate artificial intelligence as economies face mounting pressures from the AI boom, heavy borrowing and shocks caused by wars in the Middle East and Ukraine, IMF Managing Director Kristalina Georgieva said Wednesday.
“Some very tough political choices stare us in the face,” Georgieva said in a speech in Singapore ahead of the autumn meetings of the IMF and World Bank in Bangkok next week.
“My message to the world’s economic policymakers next week will be this: we cannot keep delaying necessary policy action, you have the tools, now have the wisdom to use them,” she said.
Finance ministers and central bank governors from 191 IMF and World Bank member countries will gather in Bangkok to assess the global economy and discuss strategies to support financial stability and sustained economic growth.
Georgieva said the most severe recent threats to global well-being had come from conflicts in the Middle East, Ukraine and elsewhere. But she warned that excessive debt was becoming an increasing burden for wealthy countries such as the United States, Japan and Germany, as well as for low-income nations.
High interest rates are forcing poorer countries to make difficult choices between spending on public welfare and servicing increasingly burdensome debt, she said.
Georgieva also highlighted risks arising from the rapid expansion of data-centre capacity needed to support artificial intelligence. The investment boom has helped push stock markets to record highs in many countries and supported strong economic growth despite elevated energy costs linked to the Iran war.
Investment in AI infrastructure is expected to exceed the relative scale of spending on railways, electricity grids and telecommunications networks, she said.
“Love it, hate it or fear it, AI is here, rapidly becoming a key driver of countries’ relative fortunes in the world economy,” Georgieva said.
The AI construction boom is supporting robust corporate earnings, but it is also contributing to higher inflation. At the same time, there is a lag between the large investments being made today and the economic benefits expected from AI, she said.
“If earnings fall short,” Georgieva warned, “hyperscaler leverage and large and growing global holdings of US equities could turn a disappointment into a far-reaching shock.”
Seven of the world’s top 10 countries for AI-related trade are in the Asia-Pacific region, whose share of global economic activity has risen to 43% from 25% in 1991, when the IMF and World Bank meetings were last held in Bangkok.
China, India, Japan, South Korea, Taiwan and other economies with strong technology sectors are benefiting from the AI boom, while many other countries are being left behind, Georgieva said. This could further widen economic inequality.
The rapid expansion of AI is also increasing energy demand, putting additional pressure on the prices of fuel, fertiliser, food and other key commodities.
Georgieva urged governments to rein in public spending and raise borrowing costs when necessary to contain inflation, while protecting the most vulnerable sections of society.
She also called for policies to ensure that AI is properly regulated, workers are equipped with the skills needed for a changing economy, labour markets become more flexible, entrepreneurship is encouraged and energy security is strengthened.