Artificial intelligence, energy shock and debt. These are the three main axes that will focus the debate at the IMF annual meeting next week in Bangkok. The director of the Fund, Kristalina Georgieva, recalled this in her traditional previous intervention, underlining that the AI boom drives global growth but can also exacerbate inequalities and requires greater international cooperation, while the energy crisis and the high level of public debt cast large shadows on global prospects.
"The world economy is torn between a negative energy supply shock and a positive demand impact linked to artificial intelligence. The combined impact of these two forces is very unequal," Georgieva summarized. And it is already evident that “whether we love it, hate it or fear it,” AI is quickly establishing itself as “the essential engine that dictates the prosperity trajectories of countries.” A fact that speaks for itself: electronic and technological components associated with AI currently account for more than a tenth of global merchandise trade. It is necessary, therefore, not only to stimulate short-term demand linked to the construction of infrastructure but also to increase the long-term productivity that results from its adoption. According to IMF estimates, “properly functioning” AI could generate up to half an additional percentage point of global growth per year.
The alert comes in the face of a two-speed dynamic that is being imposed: countries highly integrated in technological value chains are benefiting from the AI boom, which worryingly leaves much of the world aside. On the side of rapid growth, only the United States, China, India and the Asian countries that manufacture microchips. Where is Europe?
Here the IMF calls for international cooperation in the interests of the winning side itself. "To take advantage of the transformative power of AI, it is crucial that its access be generalized to the entire world. In a world as interconnected as ours, countries collaborate not out of charity, but out of their own interest," Georgieva remarked. The great technological rivalry between Washington and Beijing greatly complicates this cooperation, which should first go through protective regulations that the sector itself demands but that neither the US nor China supports at the moment. The Fund also warns of the evident dependence of the markets on this rise of AI and warns of the risks it poses to global financial stability.
For the IMF, in any case, the main concern comes from elsewhere. Because the positive impact of AI is offset by high fuel prices, a consequence of the war in the Middle East and Ukraine, and by the difficult financial situation of states, with high debt and deficits that reduce the room for budgetary maneuver. When the price of a barrel of Brent remains around $100, the IMF warns that price tensions may intensify this winter and that the outlook is negative not only for economies affected by conflict, but for all countries dependent on energy imports.
Here those responsible for the Fund warn against an overly generous policy of energy subsidies. "We have gone through a series of shocks: the Covid pandemic, the war in Ukraine, the inflation shock, the brutal rise in interest rates and, now, the energy shock. Each time, governments have come to the aid of households and companies by resorting to credit and deepening the deficit," Georgieva recalled. A situation in his opinion that is unsustainable given that it fuels inflation and rising public debt.
The cost of debt is another of the main problems that the 191 member countries will address in Bangkok. Public debt is at its highest level since World War II. Georgieva points to the most advanced economies, with the US leading the way and the euro zone following close behind, as the worst in class. A situation that, together with the rise in interest rates and the greater raising of money by Big Tech, is fueling debt rates to skyrocket. The 10-year sovereign debt yields of the US, Germany and Japan have reached their highest levels since 2007, 2009 and 1996, respectively. The Fund once again demands budgetary containment. Harsh recipes that Georgieva defends as “sacrifices” that “must be explained well to people that they are in their own interest.” Let them tell the French...
