Generative AI holds huge economic potential for the global economy

Generative AI holds huge economic potential for the global economy

According to a recent study by McKinsey, generative AI, such as applications like ChatGPT and Midjourney, have the potential to deliver substantial economic benefits to the global economy, valued as much as $2.6–$4.4 trillion annually. This technology is expected to have the biggest impact on the professional lives of those with higher education. Finland is among the countries that will likely experience the effects of the technology first.

Compared to earlier forms of AI and analytics, such as machine learning and deep learning, generative AI could increase productivity by up to 40 percent.

"The real impact could be even greater if the technology was integrated into software such as word processing programs or chatbots, which would free up working time for other tasks. The development of generative AI opens a new era of technological innovation – it will be a tool for increasing productivity and accelerating global economic growth," says Anna Katariina Wisakanto, digital consultant and generative AI expert at McKinsey's Helsinki office.

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Anna Katariina Wisakanto, Digital Consultant and Gen AI expert

Significant impact on different jobs and industries

McKinsey estimates that approximately 75 percent of the value that generative AI use cases could deliver comes from customer operations, marketing and sales, software engineering, and R&D. The study looked at 16 business functions and examined 63 use cases where generative AI can help ease business challenges. The technology, among other things, supports customer interactions, creates creative content for marketing and sales, and generates computer code based on natural language.

Generative AI has a significant impact across all industry sectors, especially high tech, banking, and life sciences. Across the high-tech industry, the technology could deliver value of up to $240–460 billion annually, as technology speeds up and makes software development more efficient. The banking sector can benefit up to $200–340 billion annually if the use cases are fully implemented. In addition, the retail and the consumer goods industry could collectively benefit by up to $400–660 billion a year.

"Generative AI will change the future of work – work tasks will be re-imagined and industries transformed in a matter of months rather than years. Technology allows companies and employees a new kind of agility and productivity boost, which our economy desperately needs," says Wisakanto.

Education level controls the effect of generative AI

Generative AI can automate tasks that absorb 60–70 percent of employees' time today. Such automation would free up time from routine work and leave time for creative work and innovation. This, in turn, could compensate for the slowdown in productivity growth that has occurred in recent decades.

Generative AI is expected to have the greatest impact on higher-wage and highly educated knowledge workers, which previously had the lowest potential for automation. The higher the level of education, the greater the estimated impact of the technology is considered to be.

"Knowledge workers spend a lot of time working on tasks that generative AI can automate and significantly impact on. These tasks can include actions related to decision-making, cooperation, planning, data processing and analysis, among others. Finland, with its highly educated population, holds great potential for the impact of generative AI," says Wisakanto.

Finland has promising growth prospects

Generative AI has the potential to increase labor productivity globally by 0.1–0.6 percent annually until 2040. In Finland, the productivity increase is slightly higher, roughly 0.2–0.7 percent annually. When combined with other technologies, work automation can boost annual productivity growth globally by 0.2–3.3 percentage points, and in Finland the increase can be even more substantial, approximately 0.7–3.6 percentage points annually. This growth can help compensate for declining employment growth due to aging populations. However, this will be possible only if individuals affected by the technology were to shift to other work activities that at least match their 2022 productivity levels.

"Finland has promising growth prospects within AI. According to our estimate, the Nordic countries are expected to be pioneers in automation alongside other economies such as the United States and Germany. Finland is at the top of the European DESI index*, which shows a strong digital foundation in our society. We have robust technological expertise and the ability to utilize AI effectively and safely as part of the wider business. Typical challenges for Finnish technology and business are related to scaling constraints, like scarcity of labor and resources. Generative AI can offer a concrete solution to these bottlenecks and thus accelerate growth significantly", states Wisakanto.

*The Digital Economy and Society Index (DESI) tracks Europe's overall digital performance and EU countries' progress in terms of digital competitiveness.