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Dear maria, In today's edition, we highlight: Gita Gopinath on artificial intelligence Fending off inflation and financial crises Growing threats to global trade Morocco's global voice Europe's electric vehicles

ARTIFICIAL INTELLIGENCE Perils of the “Artificial Hand” (Credit: University of Glasgow) Artificial intelligence is by no means guaranteed to benefit humans and we must consider its negative effect on employment and the social upheaval it could cause, Gita Gopinath warned on Monday. In a lecture at Glasgow University to commemorate the 300th anniversary of Scottish enlightenment economist Adam Smith’s birth, the IMF’s First Deputy Managing Director said it’s possible that AI might simply replace human jobs without creating new, more productive work for them to move into. “Given that the well-being of the individual and the plight of the common worker underpinned much of Adam Smith’s thinking, this would surely have troubled him. He was interested in developing an economy that worked for everyone—not simply a chosen few.” Today, the market for the components to develop AI tools is highly concentrated. A single company has a dominant position in the market for silicon chips best suited for AI applications, for example. Only a handful of large corporations may have the data firepower to develop high-end models in the future.  “While Smith would have been impressed by the emergence of such a powerful technology in a globalized economy, he might also have realized that the invisible hand alone may not be enough to ensure broad benefits to society,” Gopinath said. “In fact, in many areas—from finance to manufacturing— the invisible hand hasn’t been enough to ensure broad benefits for quite some time.” Watch the video

MANAGING DIRECTOR IN CROATIA Balkan's high inflation, low growth

Countries in Central, Eastern and Southeastern European have suffered a cumulative 50-billion-euro income loss since the pandemic and face a legacy of high inflation and low growth, Kristalina Georgieva told a conference in Dubrovnik hosted by the IMF and Croatia’s central bank. Speaking later in Kazakhstan, the managing director discussed reform in the Caucasus and Central Asia.

CENTRAL BANKS Fending Off Inflation and Financial Crisis (Credit: deberarr/iStock by Getty Images) Central banks can fend off financial stress without compromising their inflation-fighting stance, but the policy trade-offs between maintaining price and financial stability are becoming more challenging, three top IMF economists write in a blog. Tobias Adrian, Gita Gopinath and Pierre-Olivier Gourinchas say that regulators were able to contain contagion from the collapse of Silicon Valley Bank and Credit Suisse without retreating on the inflation front. The same was true of the Bank of England’s actions to halt the selloff in bond markets that followed the UK government’s tax-cut proposal last September. But after a long period of low inflation and interest rates, many financial institutions have grown complacent about maturity and liquidity mismatches. Rapidly rising interest rates have stressed the balance sheets of some bank and nonbank financial institutions. “How should central banks navigate this difficult trade-off?”

FINANCE & DEVELOPMENT Growing Threats to Global Trade (Credit: Nataliia Shulga/IMF) Russia’s invasion of Ukraine fueled a backlash against free trade that has been building for almost a decade. Some of the world’s largest economies are choosing to halt further international integration and, in several cases, to embrace protectionist or nationalist trade policies. Writing for the June issue of Finance & Development Magazine, Yale’s Pinelopi Goldberg and the World Bank’s Tristan Reed say there has been a clear change in policy and public attitude toward trade. How did we get here and what could come next? One possibility, they write, is that this is as far as deglobalization goes. But another possibility is a new cold war, this time between the US and China and their respective allies, as the world fragments into rival camps. “Protectionism could make the world less resilient, more unequal, and more conflict-prone.”

(Credit: Marta Doroszczyk/IMF) With the liberal global trading system facing an existential moment, as many countries become increasingly concerned that closer economic integration risks clashing with national security, Finance & Development Magazine’s June edition focuses on Trade, Disrupted. In this issue, eminent voices from international organizations, governments, and academia share their views on the global trading regime’s benefits, pitfalls, and opportunities for improvement. They discuss economic security, geoeconomic fragmentation, industrial policy, export controls, regional trade agreements, tech’s effect on trade, green trade tensions, trade’s impact on women, and much more. Authors include Benjamin Kett, Caroline Freund, Chad Bown, Christopher Bataille, David Bloom, Douglas Irwin, Jiaqian Chen, Kristalina Georgieva, Leo Zucker, Luigi Zingales, Marijn Bolhuis, Michael Froman, Michele Ruta, Nadia Rocha, Ngaire Woods, Ngozi Okonjo-Iweala, Noah Kaufman, Pinelopi Goldberg, Raghuram Rajan, Ralph Ossa, Roberta Piermartini, Sagatom Saha, Tristan Reed, and many others.

Like so many countries across the Middle East and North Africa, Morocco faced successive shocks over the past three years including a devastating drought. In this podcast, Morocco’s Finance Minister Nadia Fettah and IMF Regional Director Jihad Azour discuss how Morocco is keeping reforms on track despite the challenging circumstances, and what lessons other countries in the region might learn from Morocco’s experience.

Weekly Roundup CAUCUSUS AND CENTRAL ASIA A New Growth Model Raising long-term growth and improving living standards and inclusion are the top economic policy priorities for countries in the Caucasus and Central Asia. A paper by the IMF’s Middle East and Central Asia Department examines the region’s opportunities for developing a new growth model that could accelerate income convergence with more advanced economies and improve human-development and social outcomes. Focused on the long-term, it covers structural determinants of growth, the role of the state, climate change, and social safety nets. FISCAL FORUM Policies For Disinflation The relevance of the fiscal-monetary policy mix for disinflation, and global cooperation and climate change were the two topics at the top of the agenda at the Eighth Tokyo Fiscal Forum, organized by Japan’s Ministry of Finance, the Asian Development Bank Institute, and the IMF. “The IMF stands ready to help its membership’s efforts to strengthen public finance through policy advice and institution building,” IMF Deputy Managing Director Kenji Okamura said in opening remarks. STAFF PAPER Europe’s Electric Vehicles An IMF staff paper offers early evidence of the labor market implications of the transition to electric vehicles. It suggests that it is having an increasing adverse impact on employment in some sectors and regions. Many of the affected workers will be able to retire while workers who will have to transition to new “greener” jobs have a fair chance to do so when compared to others in the manufacturing sector, especially through training. STAFF PAPER Electricity Prices Setting electricity and other public utility prices is a complex and inefficient process that usually leads to loss-making tariffs that impose large fiscal costs. Countries commonly embark on utility pricing reform in response to these heavy fiscal pressures. An IMF staff paper discusses various reform options available to governments, with a focus on residential pricing schedules, highlighting their fiscal, financial, redistributive, and efficiency implications. STAFF PAPER Public Debt Ratios The global financial crisis and the COVID pandemic saw the largest increases in public debt since World War II. An IMF staff paper finds that, during both crises, lower-than-expected output contributed the most to the spikes in debt ratios. Rather than declining during the decade between the two crises, as might be expected, debt ratios remained stable as interest rates, policy adjustment and, in some countries, economic growth turned out to be lower than expected.

MARK YOUR CALENDAR

JUNE 11, 10 AM ESST | 3 AM ET Middle East and North Africa Fiscal Risks On the road to the IMF's annual meetings in Morocco, join IMF Deputy Managing Director Antoinette Sayeh for a discussion of how to manage fiscal risks in the Middle East and North Africa. JULY 6 - AUGUST 31 IMF Summer School This year's IMF Summer School will consist of a series of five half-hour livestreamed courses covering the following topics: 1) Macroeconomics of Climate Change: Green Public Finance; 2) Cyber Risk Supervision; 3) Public Sector Debt Statistics; 4) External Debt Statistics; 5) Virtual Training to Advance Revenue Administration: Institutional Governance. Register here

Nick Owen Editor IMF Weekend Read nowen@IMF.org