IMF tells EU ministers AI could boost growth but increase economic strains

The International Monetary Fund (IMF) has warned that artificial intelligence (AI) could simultaneously boost European economic productivity by up to 1% over five years and simultaneously increase economic strains. In an IMF paper prepared for an EU finance ministers' meeting in Dublin, the organization stated that the benefits and costs of AI are likely to be unevenly distributed across countries, regions and workers.

Around 60% of workers in advanced European economies are employed in occupations highly exposed to AI, according to the IMF. While some workers may become more productive through AI tools, others face the risk of displacement as routine tasks become automated, particularly in jobs more susceptible to AI replacement than complement.

Europe's data centers currently account for approximately 3% of the continent's electricity consumption, and this demand is expected to surge as AI usage expands. Major technology hubs like Frankfurt, London, Amsterdam, Paris, and Dublin are among the most exposed areas, with data center clusters already putting strain on local power networks. The IMF recommends that the EU invest in cross-border grid infrastructure and deepen the integration of the European energy market to address this issue.

The paper also highlights the risk of Europe developing another strategic dependency, as the US and China dominate AI model development. The IMF asserts that Europe needs significant investment in its own AI industry to avoid becoming overly reliant on foreign technology. The gains from AI are anticipated to be unevenly distributed across and within the EU, with more advanced economies expected to benefit disproportionately due to their preparedness and higher exposure to the technology.