Artificial Intelligence (AI) is set to reshape the global economy over the next decade, driving significant growth and productivity improvements across various sectors. While the exact scale of AI’s impact is still up for debate among economists and researchers, its potential is undeniable.
Economic Growth and Productivity
AI is expected to make a substantial contribution to global GDP by 2035. Here’s what some leading studies say:
- Goldman Sachs predicts AI could boost global GDP by 15% over the next 10 years (7).
- McKinsey estimates an additional $13 trillion in economic output by 2030, translating to a 1.2% annual increase in GDP (18).
- PwC projects AI could add a staggering $15.7 trillion to the global economy by 2030 (17).
The primary engine behind this growth? Productivity gains. AI has the potential to increase labor productivity by up to 40% by 2035 (19), thanks to:
- Automating routine tasks
- Enhancing decision-making
- Boosting efficiency in business processes
Sector-Specific Impacts
The economic impact of AI won’t be uniform across industries. Some sectors are poised to benefit more significantly:
- Information and Communication: Expected to see the fastest growth, at 4.8% annually by 2035 (19).
- Manufacturing: Projected to grow at 4.4% annually by 2035 (19).
- Financial Services: Anticipated growth of 4.3% annually by 2035 (19).
Other industries, including healthcare, education, and retail, are also likely to see major benefits (16).
Transforming the Job Market
AI will inevitably shake up the job market, but the overall outlook isn’t all about job losses. Many experts believe AI will create more opportunities than it replaces:
- New roles will emerge in areas like AI development, deployment, and maintenance.
- Existing jobs will be augmented, with AI handling routine tasks so workers can focus on higher-value activities (14).
That said, this transformation won’t be seamless. Short-term disruptions may require large-scale efforts to reskill and upskill the workforce (11).
A Shifting Global Economic Landscape
Not all countries will benefit equally from AI advancements:
- The United States and China are expected to gain the most from AI adoption (5).
- Developed economies are likely to see greater initial benefits, potentially widening the gap with emerging markets (10).
Investment and Innovation
AI is also spurring a wave of investment and innovation:
- Global IT spending on AI-related software, hardware, and services is projected to hit $521 billion by 2027 (9).
- Private investment in AI doubled to $94 billion in 2021 compared to the previous year (12).
Challenges and Considerations
Despite its promise, AI comes with challenges that need to be addressed to unlock its full potential:
- Regulatory and governance issues (20).
- Concerns around data privacy and intellectual property (20).
- Risks of widening economic inequality between countries and corporations (10).
- The need for significant investments in infrastructure and workforce development (11).
In Conclusion
AI holds incredible promise to drive economic growth and transform productivity across sectors. However, to truly harness its potential, we need thoughtful management, a focus on mitigating societal challenges, and efforts to ensure the benefits are shared equitably.
References:
(7) How AI can boost productivity and jump start growth | J.P. Morgan Private Bank U.S.
(18) mgi-notes-from-the-ai-frontier-modeling-the-impact-of-ai-on-the-world-economy-september-2018.ashx
(17) PwC’s Global Artificial Intelligence Study | PwC
(16) Economic potential of generative AI | McKinsey
(14) How Will AI Fundamentally Transform Our Economy? – Darden Report Online
(11) AI’s Promise for the Global Economy
(5) Economic impacts of artificial intelligence
(10) How AI Could Potentially Impact the Economy and Markets
(9) Exploring AI’s Economic Impact | American Century
Comments
One response to “What Economic impacts could be seen from AI in the next decade?”
AI can certainly do a lot more than a human in the same amount of time. If AI stays in its current form and doesn’t advance much, it will be a great tool for boosting productivity and there will be only moderate disruption. However, the more sophisticated it gets, the potential productivity gains become exponential. That is when we will be facing greater disruption.
Somers, M. (2023, November 28). How generative AI can boost highly skilled workers’ productivity. MIT Sloan School of Management. https://mitsloan.mit.edu/ideas-made-to-matter/how-generative-ai-can-boost-highly-skilled-workers-productivity