AI: The Beacon of Hope for Economic Stability

Economists suggest an AI-driven productivity surge could help stabilize strained public finances across major economies. It could boost worker efficiency and potentially lower debt by enhancing growth. However, demographic challenges and fiscal policies remain key factors in determining AI's long-term impact on debt dynamics.

Economists are highlighting the potential of an AI-driven productivity surge to stabilize strained public finances in major economies. While it could boost worker efficiency and ease debt burdens, it won't be a catch-all solution for fiscal problems, which are deeply rooted in demographic challenges and spending pressures.

The hope is that AI will shake off the productivity slump post-2008, as higher growth could make government spending and debt loads more sustainable. Experts such as Filiz Unsal from the OECD suggest that AI could reduce debt by increasing employment, thus improving overall fiscal health.

However, the biggest hurdles remain. Demographic shifts and fiscal entitlements tied to an ageing population are significant challenges. Without careful fiscal management and policy adjustments, even a productivity boom may not suffice to offset the financial strain, warns practitioners and economists.

(With inputs from agencies.)