IMF President: AI is the hope and hidden worry of the world economy

IMF Managing Director Kristalina Georgieva. (European News Agency)

[Financial Channel/Comprehensive Report] International Monetary Fund (IMF) President Kristalina Georgieva said that AI technology, which investors and governments have placed high hopes on to boost the global economy, also poses a threat to economic growth and called on policymakers to stop delaying making painful choices on the debt issue.

"CNBC" reported that George Eva said at an event held in Singapore on Wednesday (7th) that AI is quickly becoming a key driver of the fate of countries in the world economy. But advances in AI, soaring energy costs and record public debt are challenging the economy's already "unsatisfactory" growth.

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George Eva bluntly said, "Whether you love it, hate it, or are afraid of it, AI has arrived."

The IMF and the World Bank are about to hold a series of annual meetings next week. George Eva said that the global economy is being pulled in two directions at the same time. One is the "negative energy supply shock" caused by the eight-month-long war in the Persian Gulf, and the second is the "positive demand shock" brought about by the AI ​​investment boom. He said the combined impact of the two is "extremely uneven" around the world.

From a positive perspective, the proportion of global AI investment in GDP will reach or even exceed the amount of investment in railway, power grid or telecommunications network construction in the past. George Eva pointed out that AI hardware and related technology products already account for more than 1/10 of global merchandise trade.

The IMF estimates that if AI is used properly, it can contribute up to 0.5 percentage points to global economic growth every year, increasing economic growth from 3% to 3.5%, which is equivalent to adding an "ASEAN-sized economy" to the world economy.

However, Georgeeva also mentioned later that the benefits brought by AI may be quite concentrated. This wave of enthusiasm has largely bypassed those economies that are less involved in the global AI supply chain, further exacerbating the risk of expanding global economic inequality.

The AI ​​boom is also exacerbating the inflation concerns that policymakers from the United States to Europe to Asia have been worried about. Georgeeva said that the AI ​​construction boom will cause inflation, in addition to energy and food shocks, tariffs and defense spending. This inflationary pressure is reflected directly in bond markets, with bond yields in the United States, Germany and Japan soaring to their highest levels in decades.

Georgeeva pointed out that the AI ​​craze itself also has financial stability risks. Strong corporate profits are pushing up stock prices and wealth effects. However, if profits are not as good as expected, the leverage of very large companies and their large and growing holdings of U.S. stocks may turn disappointing situations into far-reaching shocks.

Georgeeva cited "Amara's Law," which states that people will overestimate a new technology in the short term and underestimate it in the long term. Georgeeva said that there will be a "period of greatest risk" in the transition period between today's AI construction boom and the benefits of future AI, adding that the first line of defense is regulation and that now may be a good time for many countries to adopt a cautiously hawkish stance on monetary policy.

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