Before countries can reap AI's benefits, they'll have to figure out how to pay for its deployment | Fortune

"AI could have significant upsides for productivity, but countries will first have to navigate a complicated and expensive landscape as they create digital infrastructure and support disrupted workforces. For countries that already deal with constrained public finances, AI's capital costs could end up sharpening the policy trade-off between assuming higher near-term fiscal risk and delaying participation in AI-driven growth opportunities."

"The Penn-Wharton Budget Model projects AI will add 1.5% to GDP and productivity over the next decade. Goldman Sachs says it could add up to three percentage points to productivity every year. By the mid-2030s, AI might increase work output by 20%, according to Vanguard. For Moody's Ratings, the global AI productivity boom will be worth 1.5% annually, averaged out across 106 countries."

"AI-powered digitalization could also plug compliance gaps, potentially adding up to 1.3% of GDP in revenue for countries with weak enforcement. But the note cautioned against treating AI as an immediate fiscal windfall. Before productivity fully kicks in, governments face upfront costs that could strain budgets already constrained."

While AI promises substantial long-term productivity gains—with projections ranging from 1.5% to 3% annual GDP growth by the mid-2030s—governments face a critical timing problem. The significant upfront costs of building digital infrastructure and supporting displaced workers must be paid immediately, straining already-constrained public finances. Countries must choose between accepting near-term fiscal risk to participate in AI-driven growth or delaying adoption. Though AI adoption offers eventual fiscal benefits through higher tax revenues and improved compliance, these gains remain years away. Governments cannot treat AI as an immediate fiscal windfall and must navigate the expensive transition period strategically.

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