The Bank for International Settlements (BIS) warned of significant global growth risks in its Annual Economic Report. High public debt, financial system vulnerabilities, and the sustainability of the AI investment boom threaten economic stability. While global activity remains resilient, the BIS stated that complex pressures require urgent and disciplined policymaking.
AI boom financing is becoming increasingly leveraged as stretched asset valuations leave core bond markets fragile. Record-high public debt financed by highly leveraged hedge funds has created a new sovereign-financial stability nexus. These combined factors pose growing risks to the global financial sector.
BIS General Manager Pablo Hernández de Cos urged policymakers to act with urgency to prevent more costly future adjustments. The report calls for a focus on fiscal sustainability and strengthening financial stability beyond the traditional banking perimeter. These measures aim to safeguard the global economy against mounting financial pressures.