Research Briefing | May 8, 2024

How GenAI will change the world economy

Generative AI has the potential to substantially improve the medium-term growth outlook for the economy. It arrives at a perfect moment – labour is going to be less supportive of growth as aging dynamics hit home and productivity is flagging.

What you will learn:

  • According to our modelling, the impact of GenAI on medium-term growth will be sizable. Using the US as a case study, we estimate GDP there could rise by between 1.8%-4% by 2032 depending on the speed of adoption. Other less flexible and knowledge-rich countries should also benefit, though to a lower extent.
  • Gains from GenAI may be even greater if it not only helps to automate tasks but also leads to increased innovation. At this stage, however, we are sceptical of a permanent increase in productivity growth – we think the more significant productivity gains will come from the automation of a wide array of tasks.
  • Although the economy wide-gains will arrive eventually, they won’t be immediate. We think the impact of GenAI is likely to be a disinflationary force for the global economy in the medium term, as higher productivity is unlikely to be matched immediately by higher wage growth. In contrast, AI-related investment may raise demand, adding to cost pressures.
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