Goldman lifts US, global long-term growth forecasts on AI boost

GOLDMAN Sachs Group lifted its long-term growth estimates for the US and many other major economies as generative artificial intelligence (AI) is set to boost productivity over the next decade.

In the US, which Goldman sees as the market leader for adoption, AI is set to add a 0.1 percentage point bump to gross domestic product gains in 2027, accelerating to a 0.4 percentage point boost in 2034. The AI impact raises Goldman’s US GDP forecast to a 2 per cent expansion rate in 2027 and to 2.3 per cent by 2034, projections show.

It will take time for companies to adopt AI, so the impact is not likely to show up for many years, the Goldman team said.

“While considerable uncertainty remains about the timing and magnitude of AI’s effects, our baseline expectation is that generative AI will affect productivity” in time, Goldman economists led by Jan Hatzius wrote on Sunday (Oct 29).

The euro area would see a 0.1 percentage point bump starting in 2028, with the lift increasing to 0.3 percentage point by 2034 – when Goldman sees the region expanding at a 1.4 per cent pace.

No game changer

China would see more modest gains, reaching a 0.2-percentage point lift by 2034, raising its expansion rate to 3.2 per cent. Japan will see a 0.3-percentage point lift by 2033, taking its GDP growth to 0.9 per cent, Goldman’s forecasts show.

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“While our base case is for a moderate global growth effect over the next decade, we emphasise that the risks around these estimates are large,” the Goldman economists wrote.

AI’s economic benefits are tied to efficiency gains as it helps automate easier but time-consuming tasks, which gives employees more time to do more productive work, according to the Goldman economists. Generative AI could automate about 25 per cent of work tasks in major developed market economies such as the US and up to 20 per cent of work in emerging markets, according to the report.

The team noted that AI is far from a “paradigm-shifting” phenomenon akin to the industrial revolution of the 1800s or the adoption of electricity in the early 1900s.

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“Structural breaks” like those lead to an extended period of accelerated productivity gains, but are very rare, with only three instances since the 1500s, according to Goldman’s analysis. BLOOMBERG