AI Cushions Global Economy, but Fed Warns of Bumpy Road

Quick Answer: The IMF says spending on data centres and microchips has helped cushion the global economy from higher energy prices caused by war in the Middle East. Global trade rose 8.3% between 2023 and 2025, a figure the IMF says would be closer to 4.6% without AI-related products. An IMF report projects that a decline in AI investment could cut global GDP by 0.4% by 2028, which is why shareholders are watching for a possible market correction.

AI investment has cushioned the global economy from rising energy prices caused by war in the Middle East, the International Monetary Fund (IMF) said in a report on Tuesday. The fund’s chief economist Silvana Tenreyro said the AI-driven lift is visible in trade data. Her point is simple: AI is now a major driver of growth.

How Much Did AI Investment Lift Global Trade?

AI investment and the global economy: leaders weigh the huge benefit and risks of AI — Leaders at the Bangkok gathering weighed the benefits and risks of AI for the global economy.

Global trade rose 8.3% between 2023 and 2025. Without AI-related products, Tenreyro said that figure would be closer to 4.6%.

Bank of Canada governor Tiff Macklem said AI is “everywhere in the global economy”. He pointed to GDP, the stock market and the bond market as places where it shows up.

AI Cushions Global Economy, but Fed Warns of Bumpy Road — Photo: Free Malaysia Today

Why Do Top Officials Call AI a ‘Huge Benefit’ but Still Warn?

Federal Reserve chair Kevin Warsh called AI the “most consequential change” to the global economy in his lifetime. He said it has “a huge benefit”.

Warsh also warned the road ahead would be “bumpy”. He cited uncertainty about the technology itself and about how the market structure will take shape.

Could a Loss of Confidence in AI Trigger a Market Correction?

IMF chief Kristalina Georgieva told AFP that any slowdown in the industry “would be felt across the world”. She warned: “If there is loss of confidence and money runs away from AI, that can lead to financial stability risks.”

The IMF report projects that a decline in AI investment could reduce global GDP by 0.4% by 2028. It adds that “weaker or less durable AI investments and profitability could be a shock that triggers a market correction”.

Can the Middle East War Puncture the AI Boom?

Moody’s Analytics economists warned that a prolonged conflict could “puncture” the boom. Higher energy prices and tighter financial conditions could raise operating costs and interest rates.

The group said doubts are growing over “the long-term profitability and viability of AI business models”. It added: “A drawn-out conflict would put serious strain on the economics behind AI investment.”

Why Does AI Regulation Matter for the Global Economy?

US President Donald Trump has urged more limited government regulation. Some in the industry have called for legislation to mitigate risks.

Georgieva linked regulation to future investment. “If there are no safeguards, then the risks may exceed the opportunities,” she said in Bangkok.

Is There a Bursa Malaysia Angle in This AI Report?

The IMF report and the Bangkok remarks do not name any Bursa Malaysia-listed company. This is a global read, not a company-specific update.

Investors may want to watch how AI-linked earnings hold up if energy costs and interest rates stay high. Our AI Stock Analysis for Malaysians guide explains how to track such signals.

Key Takeaways

AI investment lifted global trade to 8.3% growth between 2023 and 2025, versus about 4.6% without AI-related products.
The IMF projects a fall in AI investment could cut global GDP by 0.4% by 2028.
Moody’s Analytics warns a drawn-out Middle East conflict could strain AI business economics.
Regulation remains unresolved, with Georgieva saying risks may exceed opportunities without safeguards.

Disclaimer: This article is general information, not investment advice. Do your own research before making any investment decision.

Frequently Asked Questions

How much did AI boost global trade according to the IMF?

The IMF’s chief economist Silvana Tenreyro said global trade rose 8.3% between 2023 and 2025. She said the figure would be closer to 4.6% without AI-related products.

How much could a drop in AI investment cut global GDP?

An IMF report projected that a decline in AI investment could reduce global GDP by 0.4% by 2028. The report warned this could trigger a market correction.

What could puncture the AI boom, according to Moody’s Analytics?

Moody’s Analytics economists warned that a drawn-out Middle East conflict could puncture the boom. Higher energy prices and tighter financial conditions could raise operating costs and interest rates.

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