IMF chief urges co-operation on AI and war risks, as US hails economic momentum

On the final day of the International Monetary Fund and World Bank annual meetings in Bangkok, the IMF chief expressed alarm over developing nations falling behind while the US touted economic progress. IMF chief Kristalina Georgieva pleaded for worldwide collaboration to tackle multiple economic risks, including rapid AI advancements and an ongoing Middle Eastern conflict. She noted that technology's rapid pace threatened to widen the gap between advanced economies and the world's impoverished.

US Treasury Under Secretary Erin Browne countered Georgieva's concerns, highlighting record-high US stock market values, robust US economic output, and Japan's improving economy. She argued that the IMF should recognize the potential "positive economic shocks" driven by American innovation and productivity-enhancing reforms.

The IMF had slightly raised its global growth forecast to 3.1% in 2026, below the historical average, but warned of significant risks from an AI investment slowdown, rising debt levels, and the Middle East conflict. If not for the ongoing war, the IMF believed AI could have spurred more robust growth.

The US-led war against Iran and Tehran's closure of the Strait of Hormuz had triggered a global energy shock, which the IMF had anticipated fueling stronger growth. With this scenario removed, the AI boom became the primary catalyst for the global economy's limited expansion.

Emerging market stocks were volatile, with South Korean shares falling 18.6% in a week and Japan's stocks down 5.4%. Indonesia's market fell 11.6%, the sharpest one-day decline in 28 years, after being removed from the emerging market status due to MSCI's assessment.

IMF strategy chief Christian Mummsen reported a quadrupling of low-interest lending to low-income countries since the Covid pandemic, with demand expected to stay high. Developing nations were increasingly vocal about their worries, citing geopolitical tensions, climate change, and AI's potential to exacerbate wealth disparities.