Emerging markets face both promise and disruption from artificial intelligence: QNB

Doha: QNB's latest analysis reveals that artificial intelligence (AI) presents both opportunities and challenges for emerging markets. While AI has the potential to propel these economies forward, it also carries significant risks that must not be ignored.

The bank's commentary stresses the importance of seizing AI's opportunities by focusing on three key areas: building digital infrastructure, developing data ecosystems, and investing in skills. Early action in these areas can help emerging economies leverage AI as a catalyst for catch-up growth, while neglecting these foundations could exacerbate the existing gap with the technological frontier.

AI is poised to become a dominant economic force, with its global market expected to grow dramatically to around USD 4.8 trillion by 2033. For advanced economies, AI promises substantial productivity gains, but for emerging markets the implications are more nuanced and potentially disruptive.

The bank highlights the promise of AI in raising productivity, accelerating development, improving public services, and leapfrogging outdated infrastructure. However, it also warns that AI poses a threat to established sources of competitive advantage and could widen the gap between rich and poor nations, especially in countries with service sectors reliant on low-cost manual labor.

Emerging markets stand to benefit from AI-enabled tools in areas like education, healthcare, and finance. In education, AI translation models can support regional dialects and low-resource languages, while personalized tutors can improve access to quality education. In healthcare, AI-assisted diagnostics can extend services to rural areas and improve initial diagnosis quality, potentially reducing infant mortality and increasing life expectancy.

In finance, AI-assisted credit scoring using unstructured and behavioral data can help increase credit availability for small producers and entrepreneurs while reducing credit risks.

Moreover, AI can help emerging markets overcome previous constraints on growth by enabling mobile technology to leapfrog fixed-line and internet broadband networks. Indeed, emerging markets already export over USD 1 trillion in digitally deliverable services annually, and AI could further reinforce this momentum and create new industries.

However, the bank also acknowledges the disruptive potential of AI on labor markets and the development model that has historically benefited emerging economies. Around 40% of jobs in these markets are exposed to AI, particularly in industries and services with high levels of manual and routine work. Generative AI and AI agents can now handle simple cognitive tasks, data processing, and basic billing at a lower cost than employing overseas staff.

This impact is already evident in India's USD 300 billion IT outsourcing industry, where routine junior developer and business process outsourcing roles are being heavily affected. The Nifty IT index, tracking India's biggest software companies, has declined by around 15% this year, compared to a 20% gain in the broader MSCI Emerging Markets Index.