Leaders weigh 'huge benefit', risks of AI for global economy

The rapid growth of artificial intelligence (AI) has significantly bolstered global economic output, according to the International Monetary Fund (IMF) and the Bank of Canada, but experts and policymakers warn of potential downsides. The IMF, in a report published this week, found that AI-related products contributed an additional 4.6% to global trade growth between 2023 and 2025, compared to a projected 4.6% without AI.

Bank of Canada Governor Tiff Macklem highlighted AI's pervasive impact across various economic sectors, including GDP, stock markets, and bond markets.

However, while AI has provided a cushion against rising global energy costs stemming from the Middle East conflict, policymakers caution against over-reliance on AI investment. Federal Reserve Chair Kevin Warsh cautioned that the road ahead will be "bumpy" due to uncertainties in technology understanding and market structure. IMF chief Kristalina Georgieva echoed this sentiment, noting that any slowdown in AI growth could have global financial stability implications, with a projected 0.4% reduction in global GDP if investment declines.

Moody's Analytics warns that if the Middle East conflict persists, higher energy prices and tighter financial conditions could further strain AI investment viability, pushing up operating costs and interest rates. Uncertainty surrounding AI regulation also poses a challenge, with some leaders advocating for limited government oversight despite calls from some industry players for safety legislation.

IMF chief Georgieva stressed that without proper safeguards, the risks associated with AI could outweigh its potential benefits.