IMF's Georgieva says AI slowdown would factor into central bank inflation calls

What Georgieva said

Georgieva spoke at the IMF's headquarters in Washington. She said concern about reliance on the AI investment boom and high valuations was affecting markets around the world.

"Things are going up and down, and this is likely to continue," she added. Georgieva said the AI investment boom was lifting growth in some countries. It was helping to offset a negative oil-supply shock from the Middle East war. But it was also adding to inflationary pressure and financial-stability concerns. She said that volatility would complicate the job of central banks, at a time when risks to price stability had been growing.

What the 1.8% actually measures

That is the fund's stress case. The October World Economic Outlook ran a scenario in which a sharp reversal in AI investment triggers falling asset prices, weaker business spending and slower activity.

Under it, global GDP would be 1.1% below baseline by 2028, with US output 1.8% below its expected level. It is a gap, not a contraction. The figures measure how much smaller economies would be relative to the IMF's central projections, not an outright decline in output. The fund's central case puts 2026 global growth at 3.1%, up from 3.0% predicted in July but below 3.5% in 2025. The scenario is a stress test layered on top of that central forecast. The US carries the largest gap because AI infrastructure investment has supported construction, semiconductor demand and broader activity there.

Why the fund is watching credit, not just chips

The fund's concern runs past semiconductor share prices. Large technology companies increasingly rely on financing arrangements involving cloud providers, chip manufacturers and AI developers. In October the fund said that hyperscalers' share of global investment-grade bond issuance had risen from less than 1% in 2024 to roughly 10%. That borrowing exposure means disappointing AI returns could put pressure on both stock and credit markets. Default protection costs have climbed in CoreWeave's credit market as investors question debt-funded AI expansion. A steep rout in technology stocks on 5 November rippled through markets.

A Democratic midterm victory, investors feared, would increase regulatory scrutiny of AI. It would also slow the data-centre build-out.

The growth the boom is carrying

Just 32 countries now account for 95% of global growth. In April the figure was 54 countries.

The IMF has downgraded 47% of economies since those April forecasts, including several energy importers outside AI value chains. Inflation is part of the picture. The fund expects the AI investment surge to keep upward pressure on prices. It expects global headline consumer price inflation of 4.7% in 2026 and 4.1% in 2027. The oil and shipping assumptions are explicit. The projections assume an average price of $96 a barrel in 2026 and $87 in 2027. They also assume the Strait of Hormuz will reopen in March 2027 and a broad return to pre-war shipping conditions by October 2027. Petya Koeva Brooks is the IMF's deputy research director. She told Reuters that growth would have fallen to 2.5% this year without measures to blunt the effects of the oil shock. Their effect is fading as the war drags on, she said.

What happens next

Federal Reserve policymakers have flagged the same tension. AI spending could raise costs before promised productivity gains materialise, they have warned.