AI may boost euro area productivity growth by 4% in 10 years, ECB says
FILE PHOTO: AI (Artificial Intelligence) letters and robot hand are placed on computer motherboard in this illustration created on June 23, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
FRANKFURT, March 23 : Artificial intelligence could lift euro zone productivity growth by more than 4 per centage points over the next decade, although a prolonged energy shock could slow progress, European Central Bank chief economist Philip Lane said on Monday.
While the ECB's immediate focus is the conflict in the Middle East and what it may mean for inflation, Lane highlighted AI as a key long-term driver for the bloc's economic fortunes.
He told an ECB conference the potential payoff from AI adoption would vary widely depending on how fast the technology spread.
A take-up rate in line with previous innovations such as the internet would deliver at least 1.5 per centage points of extra productivity growth in 10 years, Lane said. But if adoption continued at today's pace and reached at least half the economy, the gain could exceed 4 per centage points.
"The greatest impact will be achieved if AI materially boosts the pace of innovation, as rather than just boosting the level of productivity, this could increase the long-run potential growth rate," Lane said.
He warned, however, that persistently high fuel costs curb progress in building new AI models and curtail the adoption rate too, given the technology's high energy use.
EUROPE IS BEHIND
Europe is starting from behind, Lane noted. Only about 3 per cent of euro-area patents relate to AI, compared with 9 per cent in the United States.
And euro zone residents are spending nearly 250 billion euros ($290 billion) a year on royalties to foreign patent-holders — mostly U.S.-based — underscoring the bloc’s dependence on imported technology.
Lane partly blamed Europe’s shallower capital markets, which he said constrain the investment needed to scale up innovation.
"Ensuring broad access to finance, supporting diffusion among smaller firms and investing in skills and complementary intangible assets will be central to realising AI’s potential while limiting adjustment costs," he said.
($1 = 0.8617 euros)
