Can Generative AI drive global economic growth while mitigating risks?

AI's promise for productivity and innovation

Generative AI (GenAI) technology has sparked renewed optimism for an increase in global productivity. Much like past industrial revolutions, AI has the potential to redefine how businesses operate, from automating routine tasks to generating creative outputs traditionally reserved for human workers. AI-driven models like ChatGPT have demonstrated the capacity for machines to analyse inputs and produce content autonomously, significantly reducing operational costs for companies. 

Experts suggest that AI could add trillions of dollars to global GDP by 2030, driving future innovations and job creation

Overall, the estimated boost to global growth from AI varies across studies and depends on several factors, including the pace of AI adoption, the sectors it impacts, and the regions in which it is implemented. Large international corporations have quite high expectations. 

For example, McKinsey Global Institute estimates that AI could potentially add around $13 trillion to global GDP by 2030. This represents an annual growth rate increase of about 1.2 percentage points, each year. 

PwC estimates that AI could contribute up to $15.7 trillion to the global economy by 2030, which is broken down into $6.6 trillion from increased productivity due to automation and augmentation of the workforce and $9.1 trillion from consumption-side effects due to higher product quality and new AI-enhanced products. 

Meanwhile, Goldman Sachs estimates that based on historical “productivity booms”, following following widespread adoption of the new technology (at least 50% of businesses) labour productivity could grow by 1.5 percentage points annually for over a decade, which would result in 7% annual increase in global GDP.

Challenges of slowing productivity growth

Despite technological advancements over the past decades, productivity gains have been lacklustre, particularly in Europe. The post-war productivity boom gave way to a slowdown due to shifts in economic structures, from manufacturing to services, and Europe’s aging infrastructure. GenAI offers a potential solution to these stagnant trends.

By automating both manual and cognitive tasks, AI could bridge the gap between low-skilled and high-skilled workers and revamp how businesses invest in future growth. However, Intrum’s European Payment Report 2024 shows that only 5% of businesses currently have widespread AI implementation, while many are cautious, conducting only limited, small-scale trials.

Economic inequality and risks of job displacement

While AI offers significant economic opportunities, it also presents risks, particularly around economic inequality. Countries and industries that lead in AI adoption may see exponential gains, leaving others behind. Moreover, certain jobs, particularly in clerical support and low-skill roles, are at high risk of being replaced by AI, exacerbating income inequality.

Additionally, the concentration of GenAI providers in the hands of a few large corporations threatens to create industrial monopolies, restricting competition and innovation. Intrum’s European Payment Report 2024 highlights growing concerns among business leaders that failing to adopt AI could cause them to fall behind competitors, yet many remain unsure how to fully integrate AI technologies into their payment and back-office processes.

The expected boost to economic growth from AI technologies comes mainly from enhanced labour productivity, increased operational efficiency and future innovation. However, these advancements have to be considered together with potential risks of rising inequality and polarization, apart from also looking at broader negative environmental impact.