IMF warns AI could widen Europe’s economic gaps

AI could lift European productivity by about 1 per cent over five years, but the gains may come with widening inequality, pressure on electricity networks and greater reliance on foreign technology, according to an International Monetary Fund paper prepared for European Union finance ministers in Dublin on September 18-19.

The IMF said benefits and costs are likely to vary across the 27-nation bloc, with more advanced economies positioned to gain more because they are better prepared for and more exposed to the technology. Completing the EU single market would help spread adoption and productivity gains more evenly, while addressing fragmented capital, labour and energy markets that are holding back investment and innovation.

The fund estimated that around 60 per cent of workers in advanced European economies are in occupations highly exposed to AI. Some workers could become more productive, while others face displacement as routine tasks are automated. Data centres already consume roughly 3 per cent of Europe’s electricity, and the IMF urged investment in cross-border grids, deeper energy market integration and a stronger European AI industry as the US and China dominate model development.