Artificial intelligence could add up to half a percentage point to annual global growth, but its gains may be uneven and its rapid expansion could increase inflation and financial risks, IMF Managing Director Kristalina Georgieva said at an event in Singapore on Wednesday. She urged policymakers to act on mounting economic pressures rather than delay difficult decisions. Her warning comes as AI investment grows alongside high energy costs and record public debt.
AI investment could lift growth
The IMF’s estimate of AI’s potential contribution depends on the technology being adopted effectively. Georgieva illustrated the scale of the possible increase by comparing a decade of growth rising from 3% to 3.5% with adding an economy the size of ASEAN to the world economy.
The investment boom is already visible in trade: AI hardware and related technology products account for more than a tenth of global goods trade, Georgieva said. She said investment in AI as a share of GDP could match or exceed past spending on railroads, electricity grids and telecommunications networks.
The gains may be unevenly shared
Georgieva warned that economies less connected to the global AI supply chain could miss out on much of the investment-led expansion. If the gains accrue mainly to countries and businesses already positioned to build or deploy the technology, AI could widen economic inequality between countries.
The IMF’s broader assessment also points to labour-market disruption: AI could affect nearly 40% of jobs globally. The impact will not necessarily mean every exposed role disappears; the technology may complement some work while replacing other tasks. That distinction matters for policymakers weighing productivity gains against the risk that workers and regions bear a disproportionate share of the transition.
Energy and investment add inflation pressure
Georgieva described the global economy as facing opposing forces: an energy-supply shock connected to the war in the Gulf and a demand boost from investment in AI. Their effects vary around the world, making it harder for governments to rely on one response to the pressures on growth and prices.
She said construction of AI infrastructure adds to inflationary forces alongside energy and food shocks, tariffs and defence spending. Oil prices had remained above $100 per barrel amid the Middle East conflict, while retail diesel prices had reached record highs as refining capacity constrained supply. Those costs can complicate efforts to contain inflation even as AI investment supports demand.
Debt leaves governments less room to respond
Global public debt is near its highest level since World War II and is on course to exceed 100% of GDP, Georgieva said. For 17 years, governments benefited from interest rates staying below growth rates; higher rates have ended that favourable relationship. The IMF chief said the growth needed to bring debt ratios down without fiscal action is out of reach in the near term.
Pressure is also showing in European bond markets, where spreads over German government bonds have widened for France, Italy, Ireland and Portugal. At the same time, AI-related companies issuing long-term bonds compete with governments for capital. Georgieva cautioned that some increase in yields may reflect expectations of faster growth, but urged governments to restore fiscal room after successive shocks and deficits above pre-pandemic averages.
Market optimism carries a downside
Georgieva said strong corporate earnings have helped lift share prices and wealth. But if earnings disappoint, high borrowing by large technology companies and extensive global holdings of U.S. equities could amplify the shock. That creates a financial-stability concern alongside the promise of stronger productivity.
She invoked Amara’s Law—the idea that people tend to overestimate a new technology’s short-term effects and underestimate its longer-term impact—to describe the uncertainty around AI’s transition from investment boom to broader benefits. Georgieva identified regulation and supervision as the first line of defence, while saying a more cautious monetary-policy stance may be appropriate in many countries. The challenge is to protect stability without shutting off the potential gains.
Takeaway: AI may lift global growth, but the IMF says policymakers must manage uneven gains, inflation, debt and financial risks at the same time.
References
- imfconnect.org — “AI and the Global Economy: From Risk to Opportunity”
- cnbc.com — “IMF warns AI to hit almost 40% of global employment, worsen inequality”
- BBC — “AI to hit 40% of jobs and worsen inequality, IMF says”
- LinkedIn — “IMF on AI: How to protect workers and invest in digital infrastructure | LinkedIn News posted on the topic”
- imf.org — “AI Will Transform the Global Economy. Let’s Make Sure It Benefits Humanity”
