IMF chief says world economy faces multiple risks despite resilience

NEW YORK - The world economy faces risks from stubborn inflation, higher debt service cost and artificial intelligence (AI) investment though it has proven to be more resilient than many feared, according to Kristalina Georgieva, managing director of the International Monetary Fund (IMF).

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 also increased the cost and difficulty of debt service. There is a lot of understanding of the necessity of fiscal consolidation, but not enough action, she added.

Moreover, Georgieva highlighted the 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 materialize, disappointment may lead to potentially a shock to the system," warned Georgieva.

Risk in AI financing is "primarily concentrated in the United States" while many other players in Asia and Europe are included in the supply chain of AI, added Georgieva.

The IMF's new projection on the world economy to be released in October will reflect the fact that the risks will remain high, according to Georgieva.

"Having growth that would be hovering around 3 percent is a massive achievement, given all the shocks we have been experiencing," said Georgieva.

Georgieva said she saw optimism from remarkable, fast action when it's 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," said Georgieva.

"We have to be careful and cautious. The risks are high and uncertainty is the new normal," she added.