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A stark warning!! The IMF’s Gita Gopanath warns of AI having the potential to exacerbate an economic downturn into a stifling depression.
IMF’s AI Warning: Potential Economic Crisis Ahead
In a recent address at an AI summit in Switzerland, International Monetary Fund (IMF) First Deputy Managing Director Gita Gopinath cautioned that artificial intelligence could exacerbate economic downturns, turning them into severe crises. Gopinath emphasised that while AI’s risks in privacy, security, and misinformation are often discussed, its potential to disrupt labour and financial markets and supply chains during recessions is a critical concern. She highlighted that in advanced economies, 30% of jobs are at high risk of AI substitution, with lower percentages in emerging and low-income countries, which could lead to significant long-term unemployment.
Financial Market Vulnerabilities
Gopinath pointed out that the financial sector’s rapid adoption of AI could lead to instability during economic downturns. Newer AI models, which are designed to learn independently, may perform poorly in unprecedented situations, causing market inefficiencies. She warned of the potential for rapid asset sales and price declines triggered by AI’s automated trading decisions, which could spiral out of control due to the technology’s black-box nature.
Mitigating AI’s Economic Risks
To mitigate these risks, Gopinath suggested several measures, including balanced tax policies, enhanced worker education and skills training, and stronger social safety nets. She also noted that AI itself could aid in addressing these challenges by upskilling workers and providing early warnings in financial markets. Gopinath stressed the urgent need for governments and policymakers to act swiftly to regulate AI and prepare for its disruptive impacts on the global economy.
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