Global economy navigates tariff shock as tech investment surges

According to the latest IMF projections, global growth is expected to remain at 3.3% this year, which is 0.2 percentage points higher than earlier estimates. Most of this upward revision is attributed to stronger performance in the United States and China. Importantly, current projections are broadly unchanged from a year ago, indicating that the global economy has largely absorbed the immediate impact of tariff-related shocks.

This resilience reflects several converging factors. Trade tensions have eased relative to previous peaks, fiscal stimulus has exceeded expectations in key economies, and financial conditions remain accommodative. In addition, the private sector has shown considerable adaptability in rerouting supply chains and mitigating trade disruptions, while policy frameworks have improved in many emerging market economies.

A central pillar of this strength is the surge in investment in the information technology sector, particularly in artificial intelligence. While global manufacturing activity remains subdued, IT investment in the United States has risen to its highest share of economic output since 2001. This has provided a strong boost to overall business investment and activity. Although the bulk of this investment is concentrated in the United States, positive spillovers are already visible, especially in Asia through rising technology exports.

Since late 2022, following the introduction of widely used generative AI tools, equity markets have rallied sharply. Strong earnings and favorable financial conditions have supported higher stock prices and facilitated new capital spending, reinforcing optimism about AI-driven productivity gains.

Rising leverage and AI-driven risks

Despite strong headline growth, underlying financial dynamics point to mounting vulnerabilities. The expansion is increasingly financed through debt, leading to rising leverage. This creates risks if expected returns fail to materialize or if financial conditions tighten. Profitability in the technology sector may also become sensitive to faster depreciation of advanced processors, as frequent upgrades raise costs and compress margins.

Comparisons with the dot-com boom of the late 1990s are instructive. While IT investment as a share of GDP is similar, the current increase has been more gradual and supported by stronger earnings. Estimates suggest that potential overvaluation in the U.S. equity market is about half of what it was during the dot-com era. Nevertheless, risks are elevated because recent stock market gains are heavily concentrated in AI-related firms, many key AI companies rely on debt financing, and market capitalization relative to output is now significantly higher than in the early 2000s.

Looking ahead, AI presents both upside and downside risks. On the positive side, productivity gains could lift global activity by around 0.3% this year. On the downside, a correction in AI valuations combined with tighter financial conditions could reduce global growth by about 0.4%, with the largest impact in tech-intensive economies.

These risks are unfolding amid heightened geopolitical uncertainty, expanding export controls, and constrained fiscal space in many countries. The report concludes that policymakers face a delicate balancing act. Strong financial supervision, prudent monetary policy, fiscal discipline, and measures to support workforce adaptation are essential to ensure that today’s technology-driven boom translates into sustainable and inclusive growth rather than a renewed boom-and-bust cycle.

In late December, Qazinform News Agency reported that Kazakhstan’s economy is expected to grow by more than 6% in 2025, marking the highest rate in the past ten years, according to Assistant to the President and Press Secretary of the President of Kazakhstan Ruslan Zheldibay.