AI to fuel global growth as investment spreads beyond US, IMF says

The boom in AI investment is spreading from the US to power the world economy, the head of the IMF has said, as she signals global growth will be strong as countries weather the Iran war.

“What started out as a US phenomenon with AI is now becoming a growth engine for the global economy, with other countries ramping up construction of data centres and other infrastructure,” Kristalina Georgieva, the fund’s managing director, told journalists on Tuesday.

Georgieva added that the global economy had “weathered the energy shock caused by the closure of the Strait of Hormuz better than we feared”.

Shipping out of the strait has dried up since the US launched its war on Iran in February. Before the conflict, about a fifth of seaborne oil supplies flowed through the waterway and its closure has pushed up global energy prices.

The IMF said in early July that the world’s economy would expand by 3 per cent this year, down from 3.5 per cent in 2025. It will unveil fresh forecasts in Bangkok in October.

The IMF boss said lower demand for energy, drawdowns of emergency oil and gas stocks, rising energy supplies from outside the Gulf, the addition of more renewable energy capacity and higher coal use had helped cushion the blow from the conflict.

While there remained a “tug of war” between the positive impact of the AI boom and the economic ramifications of the Iran war, risks to the global economy were less grave than earlier this year.

Georgieva’s remarks came after figures for German growth showed Europe’s largest economy was on track for its best year since 2022, expanding by an upwardly revised figure of 0.3 per cent over the second quarter.

While the AI investment boom was still most notable in the US, where it was boosting corporate earnings and consumer demand, other countries “plugged into the supply chain” and exporting AI hardware were also benefiting.

But Georgieva warned that the energy shock triggered by the US’s Iran war was not over.

“Oil and gas reserves are shrinking and, before very long, winter in the northern hemisphere will come,” she said.

Another rise in oil prices would fuel more inflation, she said, possibly forcing central banks to raise interest rates, with knock-on implications for governments’ borrowing costs and economic growth.

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