IDB chief economist stresses 'stabilization' efforts to address AI cycle

By Kang Yoon-seung

SEOUL, Oct. 27 (Yonhap) -- The chief economist of the Inter-American Development Bank (IDB) on Tuesday stressed the need to establish stabilization funds to prepare for market volatility amid the artificial intelligence (AI) boom, noting she agrees with the "spirit" of South Korea's Future Fund.

"The way you stabilize is you save during the good times, and you use (those savings) in bad times," Laura Alfaro, chief economist at the IDB, said at a press conference during the Global Financial Stability Conference 2026 in Seoul.

Alfaro noted Latin American countries have learned lessons about the importance of building resilience to market fluctuations through their experience with the so-called resource curse.

"We do tend to have a lot of minerals and oil, and they tend to fluctuate a lot in price. And so there are times when the price of oil is very high and we all have a lot of resources," she said.

"We do know there will be volatility, and I think that is true about AI. There will be volatility," she said, adding countries like South Korea need to prepare for such price fluctuations.

In this context, Alfaro suggested South Korea's Future Fund could help the country navigate fluctuations in the global AI cycle.

"So I don't know the details of the fund that is being created, but the spirit of the fund sounds like what needs to be done," she added.

South Korea previously unveiled plans to launch the Future Fund, drawing on sources including windfall tax revenue from chipmakers amid the global semiconductor supercycle.

The fund will consist of a general account for managing its financial resources and four program accounts covering youth, growth engines, regional development and education and talent development.

Alfaro added paying off debt through the fund could be considered another form of stabilization.

"There are different ways you can save. One way to save is to put some part of the money here. Another way to save is to pay off debt," she said.

Separately, the chief economist said Latin America's abundant green energy and mineral resources, such as copper, could support "two-way" flows between the region and South Korea in the AI industry.

"AI is a very energy-intensive wave of knowledge. It's likely to be the most energy-intensive wave of knowledge we have seen," she said.

"In this sense, Latin America has perhaps one or a couple of advantages that I think, if we partner with Korea, it can be mutually beneficial," she added.

Alfaro meanwhile pointed out that the continent boasts the "greenest electricity grid," noting it generates significant amounts of electricity from water, wind and sunlight.

The IDB economist noted such advantages can promote greater exchange with South Korea.

colin@yna.co.kr
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