Project in Georgia, California, and Arizona aim to strengthen America’s leadership in cutting-edge substrate technology for critical industries like AI
Today, the Biden-Harris Administration announced that the U.S. Department of Commerce (DOC) is entering negotiations to invest up to $300 million in advanced packaging research projects in Georgia, California, and Arizona to accelerate the development of cutting-edge technologies essential to the semiconductor industry. The expected recipients are Absolics Inc. in Georgia, Applied Materials Inc. in California, and Arizona State University in Arizona.
These competitively awarded research investments, each expected to total as much as $100 million, represent novel efforts in advanced substrates. Advanced substrates are physical platforms that allow multiple semiconductor chips to be assembled seamlessly together, enable high-bandwidth communication between those chips, efficiently deliver power, and dissipate unwanted heat. The advanced packaging enabled by advanced substrates translates to high performance computing for AI, next-generation wireless communication, and more efficient power electronics. Such substrates are not currently produced in the United States but are foundational to establishing and expanding domestic advanced packaging capability. Up to $300 million in federal funding will be paired with additional investments from the private sector, bringing the expected total investment across all three projects to over $470 million. This combined effort will help ensure U.S. manufacturers stay competitive and continue to drive technological innovation, giving companies a stronger edge in global competition.
“The key to the United States’ long-term competitiveness hinges on our ability to out-innovate and out-build the rest of the world. That’s why the R&D side of the CHIPS for America Program is so fundamental to our success, and these proposed investments in advanced packaging underscore the work we’re doing to prioritize every step of the semiconductor supply chain pipeline,” said U.S. Secretary of Commerce Gina Raimondo. “Emerging technology like AI requires cutting-edge advances in microelectronics, including advanced packaging. Thanks to President Biden’s and Vice President Harris’ leadership, and through these proposed investments, we are positioning the United States as a global leader in designing, manufacturing and packaging the microelectronics that will fuel tomorrow’s innovation.”
“Today’s awards are vital to secure America’s global leadership in semiconductors– making sure the supply chain here in America is on the cutting edge from end to end,” said National Economic Advisor Lael Brainard.
Rising power consumption, computational performance in AI data centers, and scalability in mobile electronics will not be solved with current packaging technology. Sustaining these industries of the future in America will require innovation at all levels. The CHIPS National Advanced Packaging Manufacturing Program (NAPMP) set aggressive technical targets for the substrates that all three entities are expected to meet or exceed. Advanced substrates are the basis for advanced packaging, which will enhance key advanced packaging technologies including but not limited to equipment, tools, processes, and process integration. The projects will play a vital role in helping to ensure that American innovation drives cutting-edge developments in semiconductor research and development (R&D) and manufacturing.
“Advanced packaging is essential to the development of the advanced semiconductors that are the drivers of emerging technology like artificial intelligence,” said Under Secretary of Commerce for Standards and Technology and National Institute of Standards and Technology Director Laurie E. Locascio. “These first investments of the National Advanced Packaging Manufacturing Program will drive breakthroughs that address a critical need in the CHIPS for America’s mission to create a robust domestic packaging industry where advanced node chips manufactured in the U.S. and abroad can be packaged within the United States.”
The proposed projects are:

Absolics, Inc. in Covington, Georgia: Absolics is poised to revolutionize glass core substrate panel manufacturing by developing cutting-edge capabilities in partnership with over 30 partners including academic institutions, large and small businesses, and non-profit entities, having been recognized as the recipient in the glass materials and substrates areas, with up to $100 million in potential funding. Through its Substrate and Materials Advanced Research and Technology (SMART) Packaging Program, Absolics aims to build a glass-core packaging ecosystem. In addition to developing the SMART Packaging Program, Absolics and their partners, is planning to support education and workforce development efforts by bringing training, internship, and certification opportunities into technical colleges, the HBCU CHIPS Network, and Veterans programs. Through these efforts, Absolics would leapfrog the current glass core substrate panel technology and support investments in a future high-volume manufacturing capability.

Applied Materials in Santa Clara, California: Applied Materials, along with a team of 10 collaborators, is working on developing and scaling a disruptive silicon-core substrate technology for next-generation advanced packaging and 3D heterogeneous integration. Applied’s silicon-core substrate technology has the potential to advance America’s leadership in advanced packaging and help catalyze an ecosystem to develop and build next-generation energy-efficient artificial intelligence (AI) and high-performance computing (HPC) systems in the US. In addition, Applied Materials’ education and workforce development plan is designed to strengthen the training and internship pipeline in the US between state universities and the semiconductor industry.

Arizona State University in Tempe, Arizona: Arizona State University is leading the charge in developing the next generation of microelectronics packaging through fan-out-wafer-level-processing (FOWLP). At the heart of this initiative is the ASU Advanced Electronics and Photonics Core Facility, where researchers are exploring the commercial viability of 300 mm wafer-level and 600 mm panel-level manufacturing, a technology that does not exist in as a commercial capability in the U.S. today. ASU’s team of over 10 partners, led by industry pioneer Deca Technologies, is centered in a regional stronghold for microelectronics manufacturing and is composed of large and small businesses, universities and technical colleges, and non-profits. This team spans the entire United States with industrial leaders in materials, equipment, chiplet design, electronic design automation, and manufacturing. ASU will establish an interconnect foundry that connects advanced packaging and workforce development programs with semiconductor fabs and manufacturers. ASU’s education and workforce development efforts bring industry-relevant training such as train the trainer, microcredentials, and quick start programs for working professionals. Inclusion of the HBCU CHIPS network and the National Center for American Indian Enterprise Development is integral to their workforce development plan.

About CHIPS for America
CHIPS for America is part of President Biden’s economic plan to invest in America, stimulate private sector investment, create good-paying jobs, make more in the United States, and revitalize communities left behind. CHIPS for America includes the CHIPS Program Office, responsible for manufacturing incentives, and the CHIPS Research and Development (R&D) Office, responsible for R&D programs. Both offices sit within the National Institute of Standards and Technology (NIST) at the Department of Commerce. NIST promotes U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life. NIST is uniquely positioned to successfully administer the CHIPS for America program because of the bureau’s strong relationships with U.S. industries, its deep understanding of the semiconductor ecosystem, and its reputation as fair and trusted. Visit https://www.chips.gov to learn more.
About CHIPS National Advanced Packaging Manufacturing Program (NAPMP)
To enable the CHIPS Research and Development Office’s vision for success, the CHIPS National Advanced Packaging Manufacturing Program will make approximately $3 billion in investments to develop critical and relevant innovations for advanced packaging technologies and accelerate their scaled transition to U.S. manufacturing entities. These investments will include research programs for core technologies that can be scaled to high-volume manufacturing, an advanced packaging piloting facility to support this scaling, resources to support the expansion of advanced packaging solutions, and workforce development. As a result, within a decade, NAPMP-funded activities, coupled with CHIPS manufacturing incentives, will establish a vibrant, self-sustaining, high-volume, domestic, advanced packaging industry where advanced-node chips manufactured in the United States are packaged in the United States. The technology developed will be leveraged in new applications and market sectors and at scale.
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Improving fiscal policy frameworks, fostering education and skills, and supporting the green transition can help ensure strong, sustainable, balanced, and inclusive growth

Blog post by Paula Beltran Saavedra, Nicolas Fernandez-Arias, Chanpheng Fizzarotti, Alberto Musso | For most Group of Twenty economies, growth is poised to weaken over the next five years and remain well below what was typical in the two decades before the pandemic.

That’s one of the biggest shared challenges for the group, which accounts for about 85 percent of global gross domestic product. Growth is more robust across the African Union, which joined the G20 last year, but booming populations mean those economies also must create jobs for millions of young people entering the labor market.
For both groups, as well as the European Union, lifting growth is essential to improving outcomes for people, and there’s a common solution: implementing priority reforms can significantly boost prospects for growth over the next five years, or medium term, as our new report to the G20 outlines. Our analysis also indicates that payoffs from structural reforms are greatest when they are carefully sequenced and reflect social consensus.
Various challenges underscore why it’s time to invest in growth-enhancing reforms. Subdued productivity growth, reinforced in some countries by adverse demographic trends, holds back potential growth, as Chapter 3 of the April 2024 World Economic Outlook details. Sustainable growth also is imperiled by elevated public debt, and increased geoeconomic fragmentation and protectionism.
As the Chart of the Week shows, the biggest priority across countries in these groups is reforming fiscal policy frameworks to aid lasting consolidation of government budgets.

Specifically, most G20 advanced economies and several EU economies would benefit from tighter public spending limits, while for most G20 emerging market and developing economies reforms to boost government revenues should be prioritized. Several African Union countries could benefit from enhanced fiscal transparency.
For many G20 and African Union economies, there are two other key areas for high priority structural reforms. First, the quality of education and skill training must be improved to better match skills with job opportunities. Second, reforms to accelerate the energy transition are essential, such as improving renewable energy capacity, enhancing the carbon tax efficacy, and phasing out fossil fuel subsidies. In several African Union economies, governance reforms are also urgently needed to strengthen the rule of law, fight corruption and improve public finance management.

 
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The average level of tax revenues among OECD countries was largely unchanged in 2023 as governments sought to ease cost-of-living pressures amid growing spending challenges related to climate change and ageing populations, according to a new report released today.
Revenue Statistics 2024 shows that the average tax-to-GDP ratio for OECD countries was 33.9% in 2023, 0.1 percentage points (p.p.) below its level in 2021 and 2022, but above its pre-pandemic level of 33.4% in 2019.
In 2023, the tax-to-GDP ratio increased in 18 of the 36 OECD countries for which preliminary data are available, declined in 17, and remained unchanged in one. The largest increases (of at least 2.5 p.p.) occurred in Luxembourg, Colombia and Türkiye, while the largest declines (of at least 3.0 p.p.) were observed in Israel, Korea and Chile.
Across the OECD, tax-to-GDP ratios ranged from 17.7% in Mexico to 43.8% in France in 2023. The difference between the highest and the lowest tax-to-GDP ratio across OECD countries was 26.1 p.p. in 2023, the smallest difference since at least 2000. Since 2019, this difference has narrowed by 5.2 p.p.

Revenue Statistics 2024 includes a special chapter on health taxes, which are increasingly common in OECD countries due to their capacity to generate revenues and to improve health outcomes by reducing consumption of harmful products. On average across OECD countries, revenues from excise taxes on alcohol, tobacco and sugar-sweetened beverages amounted to 0.7% of GDP and generated 2.2% of total tax revenues in 2022. However, these revenues declined as a proportion of GDP between 2000 and 2022 in almost all OECD countries, with the largest drop seen in revenues from excise taxes on alcohol.
Consumption Tax Trends 2024, also released today, highlights governments’ ongoing efforts to improve the performance of their VAT systems and combat fraud and non-compliance. The report shows that VAT revenues continue to rise across the OECD, reaching 20.8% of total tax revenue on average in 2022, up 0.1 p.p. from 2021.
According to the new report, which presents cross-country detailed comparative data on consumption tax rates, tax bases and design trends, most OECD countries have implemented reforms to ensure that VAT is effectively collected on online sales, in line with OECD standards, ensuring a level playing field between bricks-and-mortar businesses and online merchants.
Twenty-seven OECD countries have introduced solutions developed by the OECD to collect VAT on e-commerce sales of goods imported from abroad. These complement measures to collect VAT on online services – such as apps and streaming services – that have now been adopted by almost all OECD countries that have a VAT.
Consumption Tax Trends 2024 explains that almost all OECD countries with a VAT have now implemented digital reporting requirements, often requiring the electronic transmission of detailed transactional information in real time or periodically, to enhance VAT compliance. However, the scope and requirements of these regimes vary across OECD countries.
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Projects in Georgia, California, and Arizona aim to strengthen America’s leadership in cutting-edge substrate technology for critical industries like AI
Today, the Biden-Harris Administration announced that the U.S. Department of Commerce (DOC) is entering negotiations to invest up to $300 million in advanced packaging research projects in Georgia, California, and Arizona to accelerate the development of cutting-edge technologies essential to the semiconductor industry. The expected recipients are Absolics Inc. in Georgia, Applied Materials Inc. in California, and Arizona State University in Arizona.
These competitively awarded research investments, each expected to total as much as $100 million, represent novel efforts in advanced substrates. Advanced substrates are physical platforms that allow multiple semiconductor chips to be assembled seamlessly together, enable high-bandwidth communication between those chips, efficiently deliver power, and dissipate unwanted heat. The advanced packaging enabled by advanced substrates translates to high performance computing for AI, next-generation wireless communication, and more efficient power electronics. Such substrates are not currently produced in the United States but are foundational to establishing and expanding domestic advanced packaging capability. Up to $300 million in federal funding will be paired with additional investments from the private sector, bringing the expected total investment across all three projects to over $470 million. This combined effort will help ensure U.S. manufacturers stay competitive and continue to drive technological innovation, giving companies a stronger edge in global competition.
“The key to the United States’ long-term competitiveness hinges on our ability to out-innovate and out-build the rest of the world. That’s why the R&D side of the CHIPS for America Program is so fundamental to our success, and these proposed investments in advanced packaging underscore the work we’re doing to prioritize every step of the semiconductor supply chain pipeline,” said U.S. Secretary of Commerce Gina Raimondo. “Emerging technology like AI requires cutting-edge advances in microelectronics, including advanced packaging. Thanks to President Biden’s and Vice President Harris’ leadership, and through these proposed investments, we are positioning the United States as a global leader in designing, manufacturing and packaging the microelectronics that will fuel tomorrow’s innovation.”
“Today’s awards are vital to secure America’s global leadership in semiconductors– making sure the supply chain here in America is on the cutting edge from end to end,” said National Economic Advisor Lael Brainard.
Rising power consumption, computational performance in AI data centers, and scalability in mobile electronics will not be solved with current packaging technology. Sustaining these industries of the future in America will require innovation at all levels. The CHIPS National Advanced Packaging Manufacturing Program (NAPMP) set aggressive technical targets for the substrates that all three entities are expected to meet or exceed. Advanced substrates are the basis for advanced packaging, which will enhance key advanced packaging technologies including but not limited to equipment, tools, processes, and process integration. The projects will play a vital role in helping to ensure that American innovation drives cutting-edge developments in semiconductor research and development (R&D) and manufacturing.
“Advanced packaging is essential to the development of the advanced semiconductors that are the drivers of emerging technology like artificial intelligence,” said Under Secretary of Commerce for Standards and Technology and National Institute of Standards and Technology Director Laurie E. Locascio. “These first investments of the National Advanced Packaging Manufacturing Program will drive breakthroughs that address a critical need in the CHIPS for America’s mission to create a robust domestic packaging industry where advanced node chips manufactured in the U.S. and abroad can be packaged within the United States.”
The proposed projects are:

Absolics, Inc. in Covington, Georgia:  Absolics is poised to revolutionize glass core substrate panel manufacturing by developing cutting-edge capabilities in partnership with over 30 partners including academic institutions, large and small businesses, and non-profit entities, having been recognized as the recipient in the glass materials and substrates areas, with up to $100 million in potential funding. Through its Substrate and Materials Advanced Research and Technology (SMART) Packaging Program, Absolics aims to build a glass-core packaging ecosystem. In addition to developing the SMART Packaging Program, Absolics and their partners, is planning to support education and workforce development efforts by bringing training, internship, and certification opportunities into technical colleges, the HBCU CHIPS Network, and Veterans programs. Through these efforts, Absolics would leapfrog the current glass core substrate panel technology and support investments in a future high-volume manufacturing capability.

Applied Materials in Santa Clara, California: Applied Materials, along with a team of 10 collaborators, is working on developing and scaling a disruptive silicon-core substrate technology for next-generation advanced packaging and 3D heterogeneous integration. Applied’s silicon-core substrate technology has the potential to advance America’s leadership in advanced packaging and help catalyze an ecosystem to develop and build next-generation energy-efficient artificial intelligence (AI) and high-performance computing (HPC) systems in the US. In addition, Applied Materials’ education and workforce development plan is designed to strengthen the training and internship pipeline in the US between state universities and the semiconductor industry.

Arizona State University in Tempe, Arizona: Arizona State University is leading the charge in developing the next generation of microelectronics packaging through fan-out-wafer-level-processing (FOWLP). At the heart of this initiative is the ASU Advanced Electronics and Photonics Core Facility, where researchers are exploring the commercial viability of 300 mm wafer-level and 600 mm panel-level manufacturing, a technology that does not exist in as a commercial capability in the U.S. today.  ASU’s team of over 10 partners, led by industry pioneer Deca Technologies, is centered in a regional stronghold for microelectronics manufacturing and is composed of large and small businesses, universities and technical colleges, and non-profits. This team spans the entire United States with industrial leaders in materials, equipment, chiplet design, electronic design automation, and manufacturing. ASU will establish an interconnect foundry that connects advanced packaging and workforce development programs with semiconductor fabs and manufacturers. ASU’s education and workforce development efforts bring industry-relevant training such as train the trainer, microcredentials, and quick start programs for working professionals. Inclusion of the HBCU CHIPS network and the National Center for American Indian Enterprise Development is integral to their workforce development plan.

About CHIPS for America    
CHIPS for America is part of President Biden’s economic plan to invest in America, stimulate private sector investment, create good-paying jobs, make more in the United States, and revitalize communities left behind. CHIPS for America includes the CHIPS Program Office, responsible for manufacturing incentives, and the CHIPS Research and Development (R&D) Office, responsible for R&D programs. Both offices sit within the National Institute of Standards and Technology (NIST) at the Department of Commerce. NIST promotes U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life. NIST is uniquely positioned to successfully administer the CHIPS for America program because of the bureau’s strong relationships with U.S. industries, its deep understanding of the semiconductor ecosystem, and its reputation as fair and trusted. Visit https://www.chips.gov to learn more.
About CHIPS National Advanced Packaging Manufacturing Program (NAPMP)
To enable the CHIPS Research and Development Office’s vision for success, the CHIPS National Advanced Packaging Manufacturing Program will make approximately $3 billion in investments to develop critical and relevant innovations for advanced packaging technologies and accelerate their scaled transition to U.S. manufacturing entities. These investments will include research programs for core technologies that can be scaled to high-volume manufacturing, an advanced packaging piloting facility to support this scaling, resources to support the expansion of advanced packaging solutions, and workforce development. As a result, within a decade, NAPMP-funded activities, coupled with CHIPS manufacturing incentives, will establish a vibrant, self-sustaining, high-volume, domestic, advanced packaging industry where advanced-node chips manufactured in the United States are packaged in the United States. The technology developed will be leveraged in new applications and market sectors and at scale.
 
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Understanding the drivers of the current downturn in commercial real estate (CRE) can provide insights into the outlook for the market and potential spillovers to the financial system and wider economy.
The CRE market is facing the simultaneous effects of higher interest rates, falling demand due to a structural shift towards remote working and rising costs from higher sustainability-linked capex requirements. Understanding the role of each factor in driving prices and firms’ profits can provide some insight into how financial stability risks from CRE might evolve over the coming quarters. For example, the pressure from high interest rates could soften with a potential further easing of monetary policy, while structural factors appear unlikely to change. Moreover, spillovers to the financial system – such as deteriorating credit quality in banks’ CRE loan books – and the wider economy could differ, depending on the nature of the market downturn.

 
Chart A
The CRE market downturn has been driven by both monetary policy and falling CRE demand, with the latter likely to persist due to structural change

a) Decomposition of drivers of CRE price growth

b) Impact of monetary, CRE demand and construction supply shocks on GDP

(percentage share of various shocks to house prices dynamics)

(percentage deviation of GDP from initial level)

Sources: ECB (SDW) and ECB calculations.
Notes: Panel a: historical decomposition from a BVAR model based on the approach taken in de Nora et al.* but adapted to examine drivers of CRE price growth. The model is a Bayesian VAR of order 2, fitted on euro area data over the period from Q1 2003 to Q3 2023. The model includes the following endogenous variables: CRE prices, real estate investments, lending to NFCs, NFC income (gross operating surplus), GDP, CPI, lending rates and the euro area shadow rate. Structural shocks are identified via zero and sign restrictions. The chart shows the response to (i) a monetary policy shock triggering an increase of 1 percentage point on the policy rate on impact, (ii) a 3 standard deviation CRE preference shock, and (iii) a 3 standard deviation CRE supply shock. NFC stands for non-financial corporation.
*) de Nora, G., Lo Duca, M. and Rusnák, M., “Analysing drivers of residential real estate (RRE) prices and the effects of monetary policy tightening on RRE vulnerabilities”, Macroprudential Bulletin, ECB, 2022.

Tight monetary policy and adverse CRE demand shocks have been the main factors pushing CRE prices down since the start of 2022 (Chart A, panel a). While the downward pressure exerted by tight monetary policy is expected to decline going forward, the impact of lower CRE demand will likely persist where it is driven by pandemic-induced structural changes in preferences and new remote working practices. By contrast, construction supply shocks have played a relatively less important role in recent years. Even so, falling numbers of new building permits in many countries suggest that construction activity may start to decline in the coming quarters.[1] This is relevant to the extent that a large negative real estate construction supply shock could have particularly severe real economy spillovers, with the BVAR model showing the biggest GDP impact from this shock (Chart A, panel b).

 
Chart B
Asset write-downs have been a primary driver of falling profits among real estate firms; the sector is also seeing falling interest coverage ratios

a) Drivers of real estate firms income

b) Dynamics of key ratios in recent years

(Q1 2015-Q2 2024, percentages)

(Q1 2018-Q2 2024; left graph: percentages, right graph: multiples)

Sources: S&P Global Market Intelligence and ECB calculations.
Notes: Panel b: lines show median firm values and shaded areas show the cross-firm interquartile range. The sample consists of 100 of the euro area’s largest real estate firms and is predominantly made up of landlord firms. The interest coverage ratio is calculated as (total revenue – operating expenses)/net interest expenses.

With falling prices, asset write-downs have been the primary driver of the recent sharp drop in the headline profits of real estate firms. Declining profitability could affect the debt repayment capacity of real estate firms, with spillover effects on the credit quality of banks’ CRE loan books. Decomposing the profits of 100 of the euro area’s largest public real estate firms shows that asset write-downs have played an outsized role in driving recent declines in profits (Chart B, panel a). Like market price fluctuations, asset write-downs are likely caused by both monetary policy and reduced demand for CRE (Chart A, panel a). In light of falling CRE prices, it is important that asset write-downs are recognised to ensure that firms’ balance sheets accurately reflect their financial health. Aggregate asset write-downs posted since the start of 2022 come to just -3.05% of the value of real estate owned by firms prior to monetary tightening, although there is significant variation across firms. Compared with a cumulative market price correction of -11%, this suggests that some firms may need to recognise further write-downs in the coming quarters.[2] Asset write-downs may not immediately affect the resources available to firms to meet debt repayments, meaning that the immediate spillovers to the credit quality of banks’ CRE loan books may be limited. However, this reduction in asset values – and hence collateral values – may still pose challenges to firms when they seek to refinance their debts. Reduced access to funding could force them to deleverage, thus amplifying the CRE demand shock mentioned above and further depressing market prices.
Real estate firms’ revenue growth has not kept pace with their financing costs, which has potential implications for their repayment capacity. Unlike asset write-downs, falling revenues or rising costs will affect the resources available to firms to meet debt repayments. As a result, fluctuations in these factors will have immediate implications for credit quality. For the sample of firms examined, the ratio between revenue and expenses remained broadly stable over the period studied, suggesting that this sample of large firms has not seen capex costs exceeding their rental growth (Chart B, panel b).[3] While rental growth has kept pace with expenses for large firms, financing costs have increased disproportionately. The median real estate firm saw its interest coverage ratio drop from 4x to 2x over the course of the monetary tightening cycle, although with some recovery since the start of 2024 (Chart B, panel b). This will likely have immediate implications for the capacity of firms to meet debt repayments, with clear spillovers to bank and market credit risk. While any potential further monetary easing may reduce pressure on repayment capacity in the coming quarters, firms may still see financing costs rise as the debt that originated during the period of ultra-loose monetary policy matures. Indeed, as of June 2024 20% of loans to euro area real estate firms were due to mature within two years.[4]

This measure and the measure included in the BVAR include both commercial and residential construction.
This figure is calculated as the sum of asset write-downs across firms since the start of 2022 divided by the total value of real estate held by these firms at the end of 2021. Real estate holdings are estimated as total assets less current assets. Differences between dynamics in firms’ write-downs and aggregate market indices may of course also arise from firms holding a disproportionate amount of certain types of asset (e.g. higher quality assets).
However, market intelligence indicates that this problem may be more pronounced in smaller firms which, unfortunately, are not captured in the sample.
The data are taken from AnaCredit.

 
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By Kristalina Georgieva, Managing Director, IMF | Good morning, and welcome. Let me start by thanking Bert and the Statistics Department for organizing the 12th IMF Statistical Forum on ‘Measuring the Implications of AI on the Economy.’ You always choose a topic that is timely and important—and also fascinating!
It has been just two years since generative AI emerged from the lab and became a tool that anyone with internet access can use. We still feel the excitement of something new and world changing. At the same time, we are all concerned about potential harms.
AI has huge potential to boost growth and efficiency—call centers, for example, have reported productivity gains of 34 percent among new and lower-skilled workers. But AI could also disrupt labor and financial markets. And it could deepen inequality within and among countries, destabilizing societies at a time when many are already very polarized.
To make AI a force for good that boosts inclusive economic growth, we need concerted, coordinated actions by governments, the private sector, and civil society.
And what do we need to inform those actions? Data! Reliable, timely, accurate, actionable data.
For the next two days, you will be exploring both how to measure AI’s impact on the economy, and how AI can help us do our jobs better.
Let me pose a few questions to help guide your discussions:
First, how do we strengthen our statistical systems and frameworks so that countries can better measure the impact of AI on sectors like healthcare, finance, and manufacturing? How do ensure that we capture AI investment and its impact on productivity?
Second, over many years, countries have worked with international organizations such as the IMF to build ethical, strong, and transparent standards and guidelines for collecting, compiling, and disseminating official internationally comparable statistics—all while taking into account privacy concerns.
Are the existing standards and guidelines fit for purpose in an era of widespread adoption of AI?
Third, how can we leverage AI in the production of statistics? We see central banks exploring how GenAI can help them sift petabytes of banking data to better monitor risks and refine forecasts. We see statistical organizations use AI to help classify transactions, transform unstructured data into robust indicators, and improve the accessibility of economic data.
The IMF Statistics Department has recently established the IMF Big Data Center dedicated to supporting the use of Big Data and statistical innovation and has also led the development of StatGPT, an AI assistant that lets users talk to data, significantly reducing the time needed to find, retrieve and use data.
But those are just a few examples. We want to know: How are all of you applying this technology? How can we act together to create and share better analytical tools with policymakers in all countries?
With better data and analysis, policymakers can make better decisions, react more quickly in a crisis, and ultimately design policies that support inclusive growth.
AI has transformative potential for the world economy and for our work—if we can figure out how to measure and use it well. I’m sure you are all up for the challenge!
Thank you.
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Economic growth remains fragile, while concerns about global trade outlook add to geopolitical and policy uncertainty
High valuations and risk concentration make markets more susceptible to sudden corrections
Policy uncertainty, weak fiscal fundamentals in some countries and sluggish potential growth raise concerns about sovereign debt sustainability
Credit risk vulnerabilities in some euro area households and firms could lead to weaker asset quality for banks and non-bank financial intermediaries if downside risks to growth materialise

The European Central Bank (ECB) sees elevated financial stability vulnerabilities in a volatile environment, according to its November 2024 Financial Stability Review, which was published today. Risks to euro area economic growth have shifted to the downside as inflation has moved closer to 2%, while financial markets have experienced several pronounced but short-lived spikes in volatility in recent months. “The outlook for financial stability is clouded by heightened macro-financial and geopolitical uncertainty together with rising trade policy uncertainty” said ECB Vice-President Luis de Guindos.
While financial markets have proved resilient so far, there is no room for complacency. Underlying vulnerabilities make equity and corporate credit markets prone to further volatility. High valuations and risk concentration, especially in equity markets, increase the odds of sharp adjustments. Should adverse dynamics materialise, non-banks could amplify market stress given their liquidity fragilities, in some cases coupled with high leverage and concentrated exposures.
Despite the decline in sovereign debt-to-GDP ratios after the surge during the pandemic, fiscal fundamentals remain weak in some euro area countries. Sovereign debt service costs are expected to continue rising as maturing debt is rolled over at interest rates that are higher than those on outstanding debt. Elevated debt levels and high budget deficits, coupled with weak long-term growth-potential and policy uncertainty, increase the risk that fiscal slippage will reignite market concerns over sovereign debt sustainability.
High borrowing costs and weak growth prospects continue to weigh on corporate balance sheets, with euro area firms reporting a decline in profits due to high interest payments. The outlook for real estate markets is mixed, with residential real estate prices stabilising, while commercial real estate markets are still stressed because of challenges posed by remote working and e-commerce. Households, by contrast, are benefiting from a strong labour market and have bolstered their resilience by increasing savings and reducing debt.
While the overall increase in credit risks has so far been gradual, small and medium-sized companies and lower-income households could face strains if growth slows by more than is currently expected, which could, in turn, adversely affect the asset quality of euro area financial intermediaries. Losses on commercial real estate exposures are at risk of rising further and could be significant for individual banks and investment funds. In aggregate, however, banks’ ability to absorb further asset quality deterioration continues to be supported by high levels of profitability and by strong capital and liquidity buffers.
To preserve and strengthen financial system resilience in the current uncertain macro-financial environment, it is advisable for macroprudential authorities to maintain existing capital buffer requirements together with borrower-based measures that ensure sound lending standards. In addition, the growing market footprint and interconnectedness of non-bank financial intermediaries calls for a comprehensive set of policy measures to increase the sector’s resilience. Such resilience across the NBFI sector would also help to foster more integrated capital markets. This should enhance financial stability and complement the objectives of the capital markets union, which is aimed at supporting Europe’s productivity and economic growth.
 
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