AI Bubble Threatens Global Economy

(MENAFN) The global economy has entered the new year confronting threats from a potential "AI bubble," unprecedented public and private debt accumulation, and enduring geopolitical instability.

As numerous economies exited 2025 amid monetary policy relaxation, decelerating inflation, escalating protectionist trade barriers, and geopolitical volatility, certain major risks from last year have diminished while others are projected to persist through 2026.

According to analysis compiled by media drawing on assessments from ING Think, Capital Economics, and Deloitte, markets anticipate continued inflation reduction across many nations in 2026, with easing pressures manifested in policy interest rate adjustments.

Simultaneously, unexpectedly robust demand in select economies could reignite inflationary pressures. Consequently, inflation risks are not anticipated to dominate the global economic outlook this year to the degree witnessed in 2025.

One of the most significant 2026 risks centers on anxieties surrounding an "AI bubble." As artificial intelligence's economic impact crystallizes, investment has surged, yet analysts caution that AI "monetization" remains ambiguous.

A sharp decline in AI investment—which contributed approximately one percentage point to US economic expansion in 2025 through construction and capital expenditure—could sufficiently destabilize the US labor market to trigger a comprehensive recession.

While numerous economists project AI will enhance productivity and assist inflation reduction over time, massive short-term AI infrastructure investment could displace other economic activity.

Data centers are forecast to represent approximately 10% of US electricity consumption by 2030. Escalating demand could strain power infrastructure, heightening outage risks and electricity cost increases.

Expanding investment requirements also elevate the probability of fresh supply shortages as immigration regulations tighten across the US and Europe.

Debt at record levels
According to the International Finance Institute's debt report, aggregate global debt climbed to approximately $346 trillion in the third quarter of 2025, increasing by more than $26.4 trillion across the year's first three quarters.

Total debt reached roughly 310% of global Gross Domestic Product (GDP) during this timeframe.

Propelled primarily by public borrowing, debt levels in both advanced and emerging economies established new records.
Elevated debt relative to national income across several developed economies signals debt crisis vulnerability, while high interest rates, rising borrowing expenses, and negative capital flows are rendering debt repayment progressively difficult for developing nations.

Although debt expansion remains concentrated in the United States and China, most growth originated from developed markets, where debt accumulation accelerated this year amid policy easing by major central banks.

MENAFN06012026000045017169ID1110561979