International Monetary Fund Managing Director Kristalina Georgieva warned in Singapore on Wednesday that the global economy is split between a surge in artificial intelligence and rising energy costs, while record public debt threatens long-term recovery.
Speaking ahead of the IMF annual meetings next week in Bangkok, Georgieva warned that the combined impact of positive artificial intelligence demand shocks and negative energy supply shocks is creating a deeply unequal global economic outlook.
The IMF, headquartered in Washington, monitors the global financial system and advises its 190 member nations on fiscal and monetary policy. Singapore serves as a major financial hub in Southeast Asia, while Bangkok, the capital of Thailand, will host finance ministers and central bankers for the international organization's flagship autumn gathering.
Artificial intelligence and economic growth
Georgieva warned that whether countries like, dislike, or fear artificial intelligence, technology is rapidly establishing itself as an essential engine dictating national prosperity.
IMF data shows electronic components and technology tied to artificial intelligence now account for more than one-tenth of all global merchandise trade.
She emphasized that the issue is no longer just boosting short-term demand for infrastructure construction, but increasing long-term productivity resulting from technology adoption. According to IMF estimates, correctly applied artificial intelligence has the potential to generate up to half a percentage point of additional annual economic growth.
However, the IMF expressed serious concern over an emerging two-speed global economy. Nations heavily integrated into technology value chains, including the United States, China, India, and semiconductor manufacturers across Asia, are reaping the benefits of the artificial intelligence boom. In contrast, Georgieva stated that the ongoing technological expansion is largely leaving most other countries on the sidelines.
Global cooperation and geopolitical rivalry
To unlock the transformative power of artificial intelligence, Georgieva stressed that expanding access across the globe is critical. She noted that in an interconnected world, nations cooperate not out of charity, but out of their own self-interest.
Global cooperation, particularly through establishing regulatory safeguards, is being complicated by ongoing technological rivalry between Washington and Beijing. The United States and China remain locked in competition over advanced microchip manufacturing, artificial intelligence capabilities, and global supply chain dominance.
Energy crisis and rising crude prices
Georgieva pointed out that the positive economic impact of artificial intelligence is being offset by persistently high hydrocarbon prices and strained state finances. High public debt and budget deficits are severely reducing government fiscal room for maneuver.
She described the economic outlook as dark not only for economies affected by armed conflict, stretching from Ukraine to the Gulf, but also for countries reliant on energy imports.
Brent crude oil, the international benchmark for global energy markets, continues to trade around $100 per barrel, compared to $70 per barrel at the beginning of 2026. With winter approaching, Georgieva warned that price pressures on energy could intensify further.
To combat persistent inflation driven by energy costs, major central banks are accelerating interest rate increases. Higher borrowing costs are designed to cool price increases, but they simultaneously raise interest payments for governments, businesses, and consumers.
Record debt burdens and sovereign bond yields
High borrowing costs make it increasingly difficult for governments to offer subsidies to households and businesses facing elevated living costs. Global public debt has surged to its highest level since the Second World War and is projected to soon exceed 100 percent of global gross domestic product.
Georgieva singled out advanced economies as poor performers regarding fiscal discipline, noting that they carry some of the world's heaviest debt burdens, particularly within the eurozone. The eurozone comprises the European Union member states that share the euro currency.
The combination of tighter central bank monetary policies and intense competition from technology giants raising capital has pushed sovereign bond yields to multi-year highs. Yields on 10-year government bonds in the United States, Germany, and Japan have escalated to their highest levels since 2007, 2009, and 1996 respectively, sharply inflating national debt-servicing bills.
Fiscal stabilization and call for reforms
Georgieva expressed regret over the absence of decisive fiscal action in heavily indebted advanced economies, where she stated that credible medium-term stabilization plans are urgently needed right now.
Following successive economic crises where governments repeatedly stepped in with spending to cushion impacts, populations have grown accustomed to state financial support. However, Georgieva warned that governments cannot delay necessary political actions and ambitious reform programs any longer.
She cautioned against relying solely on artificial intelligence to trigger a sudden economic rebound, pointing out that governments were spoiled over the past 17 years by interest rates remaining permanently lower than GDP growth rates, which eased debt burdens.
Georgieva concluded that the era of low interest rates easing debt burdens has ended with recent rate hikes. She stated that governments must explain to the public that fiscal stabilization is necessary in their own interest, and that citizens must accept certain sacrifices today to secure future economic growth.
