The Bank for International Settlements warned in its annual report published yesterday that the global economy is facing a sensitive phase in which three principal risks intersect: the possibility of an artificial intelligence bubble bursting, a return of inflation, and mounting financial pressures linked to debt and credit markets.
The bank described these as among the most prominent "pressure points" that could threaten global economic stability. It noted that the financial system continues to suffer from underlying fragility that could amplify the impact of any sudden shock, adding that the global economy is "caught between progress and risk" and that its resilience is being subjected to increasing tests.
On the subject of artificial intelligence, the report warned that a decline in expected returns could trigger a sudden withdrawal of funding and turn the wave of massive investments into a prolonged slump, with the possibility that any sharp corrections in equity markets could have broader economic consequences than before — particularly given the entanglement of financing in the data centre and semiconductor sectors. The report also pointed to complex financing structures and weak disclosure within AI-related deals, which heightens the risks of amplified leverage and indirect re-hypothecation of assets.