AI to Spur Growth in Asia but Exacerbate Regional Divides, IMF Reports
Victor Chen | AFP
AI technologies may boost growth in advanced Asian economies by up to 1% annually while potentially widening disparities with emerging economies, according to an IMF study released Monday.
A recent analysis by the International Monetary Fund suggests that artificial intelligence (AI) could significantly bolster annual economic growth in advanced Asian economies by as much as one percentage point over the long term. However, this technological advancement might exacerbate regional disparities, according to the study titled 'AI and Economic Divergence in Asia.'
The IMF paper highlights that while advanced economies in Asia, such as Singapore and South Korea, are better poised to integrate AI rapidly due to superior digital infrastructure and skilled workforces, other Asian economies may lag, potentially delaying widespread AI adoption by one or two decades.
Impacts on Emerging Economies
Emerging-market and developing economies in Asia may experience average annual growth increases ranging from 0.2 to 0.8 percentage points, dependent on how quickly they can integrate AI technologies. The paper notes substantial delays might occur in low-income economies due to current capital and infrastructure limitations.
Prior to the acceleration of AI adoption, these economies might endure growth rates 0.5 to 0.6 percentage points lower annually than a scenario without AI advances. This potential growth slowdown underscores the risk of self-reinforcing economic divergence between regions.
Potential Challenges and Global Implications
The IMF study, relying on model simulations rather than explicit forecasts, proposes challenges for late-adopting economies. These include risks associated with global demand for capital increasing and subsequently raising interest rates, which could hinder their ability to finance necessary infrastructure for AI integration.
Additionally, the development of AI technology could reshape employment landscapes across the continent. As AI is capital-intensive and favors skilled labor, it might reduce the overall income share for less skilled workers, raising concerns around employment and income equality in these regions.
The IMF and World Bank are discussing these issues at their annual meetings in Bangkok, with AI's impact on productivity, employment, and inequality being significant agenda topics.
Economic Divergence and Urban Futures
Cities within advanced Asian economies could emerge as significant beneficiaries of AI advancements, becoming hubs of innovation and growth. This development presents a policy opportunity for urban leaders to harness AI for improving public services, boosting economic resilience and driving sustainable development, while addressing potential socio-economic divides.
However, this opportunity brings the challenge of preparing urban infrastructure to embrace new technologies. Focused investments in digital infrastructure, skill development programs, and civic engagement strategies could help cities in emerging economies narrow the software and skills gap, enabling a smoother transition into AI-enhanced futures.
Questions That Matter
What did the IMF study report about AI in Asia?
The IMF study reported that artificial intelligence could increase annual growth by 0.5 to 1 percent in advanced Asian economies like Singapore and South Korea. It warned of widening disparities with emerging economies.
What risks did the IMF study highlight?
The IMF study highlighted that AI's adoption might widen regional disparities. Emerging economies may adopt AI up to two decades later, facing potential growth declines of 0.5 to 0.6 percentage points annually in this period.