IMF warns world is entering an era of fiscal belt-tightening, fears public debt will exceed 100% of GDP

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Kristalina Georgieva, Managing Director of the International Monetary Fund, or IMF, called on governments with heavy debt burdens to rein in spending and advised central banks to adopt tighter monetary policy, signalling that the global economy is entering an era of belt-tightening amid the fallout from energy prices surging due to the war with Iran, record-high public debt, and debt-fuelled investment in AI. Georgieva spoke in Singapore ahead of the IMF and World Bank annual meetings to be held in Bangkok next week, saying the era in which governments could rely on low-cost funding and rapid economic growth while still keeping debt under control is coming to an end. She warned that the global public debt trajectory is approaching its highest level since the period after World War II and could exceed 100% of GDP before 2030, with advanced economies the most severely affected, while borrowing costs continue to rise, with 10-year government bond yields in the United States, Germany and Japan climbing to their highest levels since 2007, 2009 and 1996 respectively. On AI, Georgieva said that whether you like, hate or fear AI does not matter, because AI is already here. The IMF estimates that if AI is developed and adopted appropriately, it could boost global economic growth by as much as 0.5 percentage points per year, and if sustained for 10 years, the expansion of the global economy would be equivalent to the size of ASEAN. But she warned that infrastructure investment to support AI is creating inflationary pressure, and if returns fall short of expectations, it could become a major shock, along with risks from job losses, cyberattacks, and advanced new generations of AI that could slip beyond human control.

Impact on assets 3

Others▲
％Germany Government Bond 10Y
DE-10Y
▲ PositiveMonetaryrelevance

IMF chief urges tighter monetary policy and warns of rising borrowing costs; German 10Y yields already at highest since 2009, with tightening pressure pushing yields up.

％Japan Government Bond 10Y
JP-10Y
▲ PositiveMonetaryrelevance

IMF calls for tighter monetary policy amid rising global borrowing costs; Japan 10Y yields at highest since 1996, with tightening pressure pushing yields up.