Volkswacht Bodensee - IMF preparing El Nino assistance, concerned about AI bubble burst: chief to AFP

El Nino is a natural phenomenon recurring every two to seven years due to the warming of sea surfaces, bringing worldwide changes in winds, pressure and rainfall patterns.

Global forecasters predict this year's event will peak at an intensity never observed in the modern era, compounding the effects of man-made climate change which drives extreme weather patterns.

Central American countries are already grappling with drought, while Asian nations are experiencing severe disruptions to monsoon rains, resulting in damage to crops in both regions.

"We are very concerned about the El Nino that is hitting this year," Georgieva said in an interview in Singapore. "We are concerned about food security. We are concerned about pressure on inflation coming from that door, from the door of food becoming more and more expensive."

"And the advice we give to countries is to be very careful of how they deploy their very limited fiscal capacity," she said, adding that some countries may be forced "to rely on external financing".

"We are also getting ready, should this become a hit on vulnerable countries, to come to support them because one of our roles as an institution is to offer cushion in the case of exogenous shocks."

Georgieva noted the "risk of dual exogenous shocks" -- El Nino and rising energy prices as a result of the US-Iran war.

While some countries may be able to absorb these shocks, "we have Pacific island countries, more vulnerable countries like Bangladesh, poorer countries like Laos -- they are in a much tougher place", she said, calling for a "coordinated" global response.

- 'Series of shocks' -

As the Middle East conflict drags on and the Northern Hemisphere prepares for cold winter temperatures, the IMF boss warned governments worldwide against overly generous energy subsidies.

"We have gone through a series of shocks," she said.

"We had Covid, we had the war in Ukraine, we had then inflation shock, interest rates jumping and now we have the energy shock. Every time, the governments came to the rescue of people and businesses by borrowing and increasing the deficit."

"That just cannot go on any longer," Georgieva added, "because interest rates are up and borrowing costs are also up. It is not affordable."

Instead, she said, governments should "look very carefully into the measures they're putting in place" and "sharpen the targeting of this support".

Meanwhile, an artificial intelligence boom has helped boost global growth, sending tech stocks soaring.

While the IMF views AI as a powerful economic engine capable of generating up to an additional half a percentage point of annual growth globally, it is also closely watching the risks linked to this year's investment boom.

AI "lifts up global growth... So if there is a slowdown there, it would be felt across the world," Georgieva said.

"Equally, if there is loss of confidence and money runs away from AI, that can lead to financial stability risks."

K.Hofmann--VB