AI to promote long term growth in GDP, investment, consumption: BIS

Leonardo Gambacorta, head of the emerging markets unit at the Bank for International Settlements / Courtesy of Bank of Korea

By Lee Kyung-min

• Published Jun 3, 2025 4:34 PM KST

Artificial intelligence (AI) can boost growth in gross domestic product, investment and consumption in the long term, according to a senior official at the Bank for International Settlements (BIS) on Tuesday.

The expansion of AI adoption will have a positive effect on economic capacity, propelled by higher productivity growth.

However, its short-term effects on inflation and industry-specific dynamics may pose complex challenges for monetary policymakers, according to the report authored by the bank for central banks.

The findings were presented at the 2025 Bank of Korea International Conference. This year’s theme was “Structural Shifts and Monetary Policy.”

“AI adoption will likely boost output, consumption and investment over time,” said Leonardo Gambacorta, head of the emerging markets unit at the BIS, during the conference.

AI has, in his view, great potential to mitigate long-term weakness in demands from structural challenges, including population aging, reshoring and supply chain reorientation.

“AI, in general, helps stronger growth and productivity, but policy responses should vary to reflect uncertainty in inflation.”

In one of the two scenarios, the prices of goods and services will initially decline if the effects of AI are unanticipated and lead to no meaningful increase in demand, the economist said.

In this case, the central bank key rate will go down first. Then, the rates will be raised back up to the initial level to counteract rising prices of goods and services triggered by higher demands.

However, in the second scenario, where the effects are anticipated, inflation will rise immediately due to rising demands.

“What the study found was that inflation response depends on households’ and firms’ anticipation of the impact of AI. More research is needed obviously, given lots of caveats.”

The study also found that labor-intensive industries, compared to capital-intensive ones, could see smaller gains in output due to higher real wages associated with higher labor productivity.

Another notable finding was that the consumer goods industry stands to benefit immensely from the AI adoption, powered by labor in the industry being reallocated to capital-intensive sectors. This will, in turn, bolster the output and productivity of the economy.