IMF President urges nations to address fiscal issues: central banks must focus on combating inflation. The AI boom supports the global economy.

Kristalina Georgieva, President of the International Monetary Fund (IMF), warned on Tuesday that as the global economy faces multiple challenges such as fiscal pressures, high inflation, and geopolitical conflicts, governments must develop credible fiscal consolidation plans, while central banks worldwide need to keep controlling inflation as a core policy priority. She also pointed out that the current global economy is undergoing a unique "tug of war," where the negative supply shocks caused by conflicts in the Middle East are at odds with the positive demand shocks brought about by investments in artificial intelligence. Georgieva stated to reporters at the IMF headquarters in Washington that all countries need to address their financial issues and devise and announce credible plans to ensure that government debt and fiscal deficits are on a sustainable path. Regarding monetary policy, she emphasized that central banks must "stay highly focused" on their core responsibility of price stability. With inflation not yet fully under control, central banks cannot let their guard down prematurely. Georgieva noted that despite persistent stubborn inflation and trade tensions affecting the global economy, overall performance remains resilient, with one important reason being a significant increase in investments in artificial intelligence. The construction of AI infrastructure is leading to massive capital expenditure demands, providing new momentum for global economic growth. However, Georgieva cautioned that the global economic outlook remains highly uncertain, as the recent rise in global bond yields and limited progress in reducing inflation both reflect that the market is still under considerable pressure. In July of this year, the IMF broadly maintained its global economic growth forecast, expecting about a 3% growth in the global economy by 2026. However, due to rising energy and food prices, the institution revised its forecast for global consumer price inflation upward. The IMF will hold its annual meeting in Bangkok this October, where it will release its latest global economic assessment. Georgieva provided a vivid description of the two main forces currently facing the global economy. She stated that the energy shocks triggered by the war in Iran have not yet come to an end. "In short, we are actually experiencing a tug of war, with negative supply shocks from the Middle East on one side and positive demand shocks from AI on the other." The conflict in the Middle East has driven up energy costs and disrupted supply chains, creating negative supply shocks for the global economy. At the same time, massive investments by technology companies in AI chips, data centers, electricity, and related infrastructure continue to create new demand and support economic growth. This combination also presents central banks worldwide with a more complex policy environment. On one hand, energy supply shocks may continue to drive up inflation; on the other hand, the AI investment boom could maintain strong economic demand, making it more difficult to cool inflation. Georgieva also outlined a range of potential risks facing the global economy in the coming months. As the Northern Hemisphere gradually enters winter, declining oil and gas inventories may increase supply pressures in the energy market. Meanwhile, severe El Nio weather could impact global agricultural production, further exacerbating food security issues. Furthermore, the IMF is closely monitoring the rapid development of AI and its potential implications for financial stability. Georgieva stated that these risks mean governments and central banks have "no room for complacency." Although the global economy has performed "not too poorly" so far, this does not imply that the future environment has become any easier. This week, Georgieva will also take part in the Federal Reserve's annual economic policy symposium held in Jackson Hole, Wyoming, for the first time. Federal Reserve Chairman Powell will deliver his first major speech since taking office during the meeting, with the market closely seeking clues regarding the future path of interest rates. Against a backdrop of inflation still above targets, long-term bond yields at elevated levels, and increasing global fiscal pressures, how major central banks balance economic growth with price stability in the next stage will be a key focus of the meeting. Meanwhile, she revealed that the IMF is adjusting its oversight and assessment methods for member countries, hoping to employ more scenario analysis and contingency planning to help countries respond more flexibly to potential shocks in an increasingly uncertain global environment. Overall, Georgieva believes that the AI investment boom is helping the global economy offset some of the energy and geopolitical shocks, but this is not enough to eliminate fiscal, inflation, and financial market risks. Governments need to improve their debt and deficit situations, while global central banks should still prioritize restoring price stability.