NEW YORK, Sept 21 (Xinhua) — The world economy faces risks from stubborn inflation, higher debt service costs and investment in artificial intelligence (AI), although it has proven more resilient than many feared, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva, reported Xinhua.
Speaking in a dialogue at a special edition of the Qatar Economic Forum in New York City on Sunday, Georgieva said: “Inflation is stubborn. We are not anticipating a quick resolution. And that means that many central banks have to tighten.”
Georgieva noted that the fight to secure price stability had also increased the cost and difficulty of servicing debt.
There is a lot of understanding of the need for fiscal consolidation, but not enough action, she added.
Moreover, Georgieva highlighted potential risks from leverage and circular financing in AI investment, saying this is “something that we have to be mindful of”.
“If AI disappoints because we have these high expectations, if they don’t materialise, disappointment may lead to potentially a shock to the system,” Georgieva warned.
Risk in AI financing is “primarily concentrated in the United States (US)”, while many other players in Asia and Europe are included in the AI supply chain, Georgieva added.
The IMF’s new projection for the world economy, to be released in October, will reflect the fact that risks will remain high, according to Georgieva.
“Having growth that would be hovering around 3 per cent is a massive achievement, given all the shocks we have been experiencing,” Georgieva said.
Georgieva said she saw grounds for optimism in the remarkable, rapid action taken when necessary to counter the energy supply shock.
“While there is a lot of talk about a fragmented world. And indeed, it is less unified. It is still a world in which we are interdependent, and we cooperate,” Georgieva said.
“We have to be careful and cautious. The risks are high, and uncertainty is the new normal,” she added.
