IMF warns AI correction would hit real economy

The International Monetary Fund used its annual meetings in Bangkok to warn that a sharp drop in artificial intelligence investment could reach well beyond financial markets. Asia's output could end up 1.7% below forecast, a hit among the regions the IMF reports exceeded only by the United States. Two reports released Tuesday, Oct. 13, the Global Financial Stability Report (GFSR) and the World Economic Outlook (WEO), named an AI-driven selloff, rising government bond yields and cyberattacks as the main near-term threats to markets that have so far held up well.themorning+2

"An AI market correction will affect the real economy," Athanasios Vamvakidis, deputy director of the IMF's Monetary and Capital Markets Department, told reporters. He added that market "resilience is not necessarily safety".malaya

Scenario: global output 1.1% below forecast

The WEO's risk scenario assumes the productivity gains people expect from AI do not show up. Investment unwinds, US stocks fall 20% and stocks elsewhere fall 15%. Global output would then be 1.1% below the baseline by 2028, with losses of 1.8% in the United States and 1.7% in Asia. Asian technology exporters would see their export prices drop 20%, and emerging markets would face higher borrowing costs. IMF deputy research director Petya Koeva Brooks told Reuters that even this scenario would probably not cause a global recession.reuters+1

The IMF's chief economist, Silvana Tenreyro, said trade in AI-related goods grew 29% from 2023 to 2025, while total trade grew 8.3%. Without AI products, trade growth would have been only 4.6%. Taiwan and Korea supply 62% of net trade in AI computing hardware, which the IMF said creates potential choke points. The fund raised its 2026 global growth forecast to 3.1%. Strong AI investment is offsetting higher oil prices caused by the war in the Middle East.themorning+2

Debt is building in the AI sector

The GFSR said debt in the AI sector could make a shock worse. So-called hyperscalers, the largest cloud companies, account for almost 10% of global investment-grade bond issuance so far in 2026, compared with about 0.5% in 2024. The IMF looked at 14 AI deals and found about $$300$$ billion dollars in equity and $$650$$ billion dollars in debt, in exchange for $$1.4$$ trillion dollars in future revenue commitments. "If there are questions about the monetization of AI, the equity investments will deplete in value, the debt may be difficult to service, and the revenue commitments in the future may not materialize," said Jason Wu, an assistant director at the IMF.imf+3

Bond yields and cyber threats

The IMF said risks in bond markets have grown since April. Higher energy prices have pushed up government bond yields, and fiscal deficits remain unresolved. On cybersecurity, the IMF found that in more than 70% of cases in 2026, software providers had almost no time to fix flaws before attackers exploited them. A bank stress test found the system broadly resilient. Still, banks holding 22% of global banking assets would have weak capital levels under the test, up from 18% in 2025.ctrlai+1