The Role of Artificial Intelligence in the Post-Pandemic Global Economy

In the wake of the pandemic, the global economy is grappling with sluggish growth, persistent inflation, slow progress on sustainability, and elevated borrowing costs, all of which are hindering investment, including in the critical energy transition. Among these challenges, one of the most significant barriers remains the low productivity that has persisted since the global financial crisis.

Artificial Intelligence (AI), which has surged into prominence like a comet, offers the potential to reverse this trend by delivering long-term productivity gains. However, despite its promise, AI’s transformative impact will require time and the implementation of appropriate policies to integrate its applications across various sectors of the economy.

AI's Projected Economic Impact

Recent projections underline AI’s potential to reshape the global economy. According to a survey by the International Data Corporation (IDC), AI is expected to generate a total economic impact of $19.9 trillion by 2030, contributing 3.5% to global GDP. Its influence will extend to industries such as call centers, translation, accounting, and machine control, where routine tasks can be automated and operations optimized.

Notably, 98% of business leaders regard AI as a priority, with every dollar spent on AI in 2030 projected to generate $4.60 in global economic benefits. In addition to transforming industries and creating new markets, AI will also reshape the job landscape. While roles such as AI engineers and ethicists will emerge, positions requiring social and emotional skills, like nursing, are likely to remain resilient. The workforce must adapt to this shift, as those who effectively leverage AI will gain a competitive edge.

Measuring AI Readiness

A recent Artificial Intelligence Readiness Index (AIPI) published by the International Monetary Fund (IMF) evaluates the readiness of 174 countries to adopt and utilize AI in business processes. The index measures factors such as digital infrastructure, human capital, labor policies, innovation, integration, and regulation. Cyprus, for instance, has a readiness rate of 0.63, ranking 43rd globally according to Oxford Insights, while Greece is ranked 52nd with a score of 57.95.

Risks to Jobs and Markets

While AI holds immense potential to enhance productivity, boost economic growth, and increase incomes, it also poses a significant threat to employment. IMF research suggests that AI could endanger 33% of jobs in developed economies, 24% in emerging economies, and 18% in low-income countries.

In financial markets, AI integration could improve risk management and liquidity but may also create challenges, such as making markets more opaque, harder to regulate, and vulnerable to cyberattacks. While AI-powered trading strategies can process massive amounts of data instantly, raising automation levels, there is concern that these technologies could destabilize markets. For now, the use of AI in investment remains in its infancy, though its potential for disruption is significant.

Risks of Widening Inequality

The economic impact of AI will likely be uneven, particularly in Europe, the Middle East, and Africa (EMEA). Western Europe is expected to see the greatest benefits from AI adoption, while Sub-Saharan Africa may lag behind due to limited resources and infrastructure. While AI promises to transform economies and societies, it may exacerbate income inequality both within and between countries.

Wealthier nations, with their advanced digital infrastructure and significant investments, are better positioned to harness AI’s benefits. In contrast, poorer countries often lack the necessary digital access and capital, leaving them less prepared for the social and economic disruptions AI may cause. Automation also puts pressure on traditional growth models, such as export industries in developing nations, potentially eroding opportunities for cheaper labor.

Addressing Inequalities

To mitigate these disparities, targeted investments in digital infrastructure, education, and international cooperation are essential. Without such measures, AI could widen the gap between rich and poor nations, hindering progress toward the Sustainable Development Goals.

AI in Financial Transactions

AI’s growing use in trading has led to increased trading volumes, with AI-driven strategies enabling faster price reactions to news, such as U.S. Federal Reserve announcements. However, this can heighten market volatility and reduce transparency, especially as investments shift toward less regulated entities like hedge funds.

Regulatory authorities must bolster mechanisms to address events like flash crashes and impose stricter oversight on non-banking entities to ensure stability.

Human-Machine Collaboration

Despite concerns about AI’s risks, human-machine collaboration is widely seen as the most effective model for leveraging the technology. Comprehensive policies to ensure accessibility, education, and widespread dissemination of AI are critical. While AI is poised to drive structural changes, it offers the potential to accelerate economic growth, reduce the cost of capital, and address pressing challenges such as sustainability and population aging.

By fLEXI tEAM