IMF chief warns energy shock, growing debt and AI risks threaten global growth

The global economy is facing threats from high energy prices, soaring public debt, and potential risks from the rapid growth of artificial intelligence, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva. In a speech preceding the IMF and World Bank Annual Meetings in Bangkok, Georgieva highlighted how governments must implement protective fiscal and monetary policies to counterbalance these challenges.

The IMF warns that a supply shock from Middle East conflicts and a demand shock from artificial intelligence are negatively impacting economies worldwide, with AI advancements particularly bypassing certain nations. IMF growth forecasts for 2026, to be released during the Bangkok meetings, are expected to reveal significant growth downgrades in war-affected countries like Ukraine and Gulf nations impacted by Iranian strikes and reduced energy exports.

Despite the IMF's prediction of a rebound to 3.4% growth in 2027, Georgieva stated that oil prices remain at $100 per barrel, with refining capacity constraints adding significant costs. Rising energy prices exacerbate inflation, interest rates, and bond yields, pushing US, German, and Japanese 10-year sovereign yields to their highest levels since 2007, 2009, and 1996, respectively.

The burden of high public debt, projected to surpass 100% of GDP before 2030, is disproportionately affecting advanced economies, including the U.S. Georgieva emphasized that policymakers should prioritize medium-term fiscal consolidation plans, along with potential upfront measures to alleviate pressure on monetary policy. Georgieva also cautioned about the risks posed by artificial intelligence, noting that the rapid investment in AI as a percentage of GDP may lead to market disappointment and significant economic shocks.

Despite the challenges, she suggested that well-managed AI could contribute up to half a percentage point to global growth annually, provided proper regulatory safeguards are in place.