AI Could Boost Euro Area Productivity Growth by 4%, Says ECB

The ECB estimates AI could add over 4 percentage points to euro‑area productivity growth over 10 years -- depending on adoption speed -- but warns that high energy costs and Europe's weaker innovation ecosystem could limit gains. ECB: AI May Boost Euro Area Productivity Growth by Over 4% in 10 Years AI's Potential Impact on Eurozone Productivity and Economic Growth By Francesco Canepa ECB's Outlook on AI and Productivity Growth FRANKFURT, March 23 (Reuters) - Artificial intelligence could lift euro zone productivity growth by more than 4 percentage points over the next decade, although a prolonged energy shock could slow progress, European Central Bank chief economist Philip Lane said on Monday. While the ECB's immediate focus is the conflict in the Middle East and what it may mean for inflation, Lane highlighted AI as a key long-term driver for the bloc's economic fortunes. Adoption Rates and Potential Payoff He told an ECB conference the potential payoff from AI adoption would vary widely depending on how fast the technology spread. A take-up rate in line with previous innovations such as the internet would deliver at least 1.5 percentage points of extra productivity growth in 10 years, Lane said. But if adoption continued at today's pace and reached at least half the economy, the gain could exceed 4 percentage points. Innovation and Long-Term Growth "The greatest impact will be achieved if AI materially boosts the pace of innovation, as rather than just boosting the level of productivity, this could increase the long-run potential growth rate," Lane said. Energy Costs and AI Adoption He warned, however, that persistently high fuel costs curb progress in building new AI models and curtail the adoption rate too, given the technology's high energy use. Europe's Position in the Global AI Race EUROPE IS BEHIND Patent Activity and Technology Dependence Europe is starting from behind, Lane noted. Only about 3% of euro-area patents relate to AI, compared with 9% in the United States. And euro zone residents are spending nearly 250 billion euros ($290 billion) a year on royalties to foreign patent-holders -- mostly U.S.-based -- underscoring the bloc's dependence on imported technology. Challenges in Capital Markets and Innovation Investment Lane partly blamed Europe's shallower capital markets, which he said constrain the investment needed to scale up innovation. Policy Recommendations for AI Advancement "Ensuring broad access to finance, supporting diffusion among smaller firms and investing in skills and complementary intangible assets will be central to realising AI's potential while limiting adjustment costs," he said. ($1 = 0.8617 euros) (Reporting by Francesco Canepa, editing by Andrei Khalip)