bip’s global outlook highlights AI boom risk amid supply shocks

MUMBAI, 20 SEPTEMBER 2026 —

The Bank for International Settlements (BIS) said on 11 September 2026 that the world’s resilience to recent supply shocks has been largely supported by investment in artificial intelligence (AI), but warned that a future bust could reverse gains in investment, consumption and exports.

BIS General Manager Pablo Hernández de Cos noted that the past six years have seen a sequence of negative supply shocks – the COVID‑19 pandemic, the war in Ukraine, a tariff shock and the recent conflict in the Middle East – that have pushed growth down and inflation up. “These shocks move growth on the negative side and inflation on the positive side in the short run,” he said.

He added that central banks must analyse medium‑run impacts, particularly as oil and other commodity prices have risen in most economies.

The BIS stressed that monetary policy alone cannot address the challenges of supply shocks. “Other policymakers and instruments must also confront the challenges generated by supply shocks,” Hernández de Cos said. He highlighted that governments and firms are building inventories to create a buffer and that diversification of supply chains is already underway. “In the medium run, diversification is also an important strategy,” he added.

He said that technological developments, such as alternative energy production, can provide a long‑run response to supply disruptions.

Central banks, he said, must keep price stability at the core of their mandate and monitor potential second‑round effects from rising energy prices, including on inflation expectations. “This should also condition the monetary‑policy response,” he said. He warned that the impact of geopolitical tensions depends on a country’s dependencies and global value chains, and that many governments are trying to reduce these dependencies.

The BIS report, published in its Annual Economic Report, identified two main reasons why the AI investment boom may become unsustainable. First, a race among firms to capture market share has led to overinvestment. “If returns disappoint, that can trigger a bust,” Hernández de Cos said. Second, the capital expenditure behind AI is increasingly financed through debt and leverage, including opaque private‑credit structures.

“If returns fall, the bust could be amplified by these financial channels,” he added.

Hernández de Cos said that AI has been a key driver of recent global resilience. “AI has supported investment, but there are also wealth effects coming from the valuation of AI‑related stocks that have boosted consumption,” he said. He noted that in the United States, where households participate heavily in capital markets, these wealth effects are particularly pronounced. In some Asian economies, AI investment has spurred export growth.

“If a bust occurs, these channels—investment, consumption and exports—could move in the opposite direction,” he warned.

The BIS analysis also examined AI’s impact on productivity and the labour market. “For certain tasks, AI can improve productivity in a very significant manner,” Hernández de Cos said. He said that whether this translates into higher productivity for the economy as a whole depends on the reaction of capital and labour.

He noted that AI could be a complement or a substitute for labour, with clear sectoral differences, and that the final impact will depend on how well the labour market and infrastructure in each economy are prepared.

The report calls for proactive measures to mitigate potential negative labour‑market effects. “Training and active labour‑market policies are essential,” Hernández de Cos said. He urged policymakers to be ready for possible unemployment shocks that could arise if AI displaces certain tasks.

In summary, the BIS warns that while AI investment has helped the global economy weather recent shocks, overinvestment and high leverage could trigger a future bust. Central banks must balance price stability with vigilance over second‑round inflationary pressures, and governments and firms should diversify supply chains, build inventories and invest in AI and alternative energy to safeguard resilience.