AI Boom Meets War And Rising Debt. IMF Warns Global Economy Is Facing a Risky Mix.

Investments in artificial intelligence are providing a lift to the global economy, but the boom is taking place alongside high energy costs and rising public debt that are putting additional pressure on governments and financial markets, International Monetary Fund Managing Director Kristalina Georgieva said on Wednesday.

Speaking in Singapore ahead of next week’s IMF and World Bank annual meetings in Bangkok, Georgieva described the world economy as being pulled by a negative energy supply shock linked to the war in the Gulf and a positive demand shock from heavy investment in AI.

“Love it, hate it, or fear it, AI is here,” Georgieva said during the IMF’s Annual Meetings Curtain Raiser, adding that the technology is rapidly becoming an important factor in countries’ economic performance.

The IMF has estimated that AI, if successfully adopted, could eventually add as much as half a percentage point to annual global growth. Georgieva said an increase from around 3% to 3.5% sustained over a decade would be equivalent to adding an economy roughly the size of ASEAN to global output.

Investment is already accelerating. Georgieva said global AI investment as a share of economic output is on track to match or exceed the scale of earlier infrastructure investment waves, including railroads, electricity grids and telecommunications networks.

AI hardware and related technology products now account for more than a tenth of global goods trade, she said.

The benefits, however, have not been distributed evenly. Economies deeply integrated into technology supply chains have gained more from the surge in AI-related investment and trade, while countries with less exposure to the industry have benefited less.

The IMF’s July World Economic Outlook Update projected global growth of 3% in 2026 and 3.4% in 2027, with AI-related demand supporting economies linked to global technology supply chains while the Middle East war weighed more heavily on energy importers and vulnerable economies.

The AI buildout is also contributing to inflationary pressure because of the scale of spending and the industry’s large energy requirements.

“The AI building boom is inflationary,” Georgieva said, while also pointing to energy and food shocks, tariffs, defense spending and high public debt as potential sources of price pressure.

The IMF chief said policymakers must also account for financial stability risks if expectations surrounding AI companies are not met.

Strong corporate earnings have supported stock prices, but Georgieva warned that weaker-than-expected earnings could have broader consequences because of borrowing by major AI companies and the large global exposure to U.S. equities.

“Should earnings fall short, however, hyperscaler leverage and large and growing global holdings of U.S. equities could turn a disappointment into a far-reaching shock,” she said.

Public debt is another major concern for the IMF. Global government debt rose to just under 94% of GDP in 2025 and is expected to reach 100% by 2029, according to the IMF’s April Fiscal Monitor. The Fund said that level was previously reached only in the aftermath of World War II.

Higher interest rates have made those debt levels more difficult to manage.

Georgieva said governments had benefited for years from an environment in which interest rates generally remained below economic growth rates, helping keep debt burdens manageable even as borrowing increased.

That relationship has become less favorable as borrowing costs have risen, making it harder for countries to reduce their debt ratios through economic growth alone.

The IMF has called for governments with stretched public finances to establish credible medium-term plans to reduce deficits and rebuild fiscal buffers.

Energy costs are adding to the problem. The Fund said in September that the Middle East conflict continued to disrupt energy supply, while strategic oil and gas reserves would eventually need to be replenished. AI itself is also increasing electricity demand.

Georgieva said central banks should remain focused on controlling inflation and suggested that a “prudently hawkish bias” could be appropriate in many economies.

The IMF and World Bank annual meetings are scheduled to run in Bangkok from Oct. 12 through Oct. 18, with updated IMF economic projections due during the meetings.