IMF flags 3 risks that could crash global financial markets
What's the story
The International Monetary Fund (IMF) has warned of "elevated" risks to the global financial system. The warning comes from its latest Global Financial Stability Report, released during the annual meetings with the World Bank in Bangkok, Thailand. The report highlights potential dangers such as an artificial intelligence (AI)-driven market correction and cyber threats that could have "severe" consequences.
Market volatility
AI-driven market correction
The IMF's report notes that the recent surge in AI, along with the rush to produce semiconductors and build data centers, has boosted global growth despite geopolitical tensions.
However, it also warns of a possible market correction due to weaker or less durable AI investments and profitability.
"Weaker or less durable AI investments and profitability could be a shock that triggers a market correction," the report said.
Cybersecurity risks
Cyber threats to financial stability
The IMF's report also highlights the unprecedented risks posed by AI to the global economy.
It warns that "severe cyber incidents could undermine market confidence and disrupt critical financial market infrastructure and operations."
Athanasios Vamvakidis, deputy director of the IMF's Monetary and Capital Markets Department, stressed that "the policy priority should be to strengthen resilience before new shocks hit the economy."
Cyber defense
Advanced AI and cyber vulnerabilities
The IMF report also highlights that while advanced AI models could be used to launch cyberattacks, they can also be leveraged for defense.
This duality underscores the complex relationship between technological advancement and security threats.
The report further warns of a potential spike in bond yields, which could trigger severe shocks due to the "foundational importance of sovereign bond markets."