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Since 2019, the World Bank has been actively engaged with Saudi authorities to enhance the Kingdom’s digital sector, and with AI adoption spreading at breakneck speed across the globe, this work continues. Our collaboration has aimed to transform the way people in Saudi Arabia experience everyday online transactions and engage with government services through partnership and technical assistance with four key digital authorities: 1) the Ministry of Communications and Information Technologies (MCIT), 2) the Saudi Digital Government Authority, 3) the Saudi Data and Artificial Intelligence Authority, and 4) the Digital Cooperation Organization.Â
And tangible results were achieved. For example, Saudi Arabia successfully implemented key reforms that revolutionized the production and delivery of public services through digital means. These reforms have improved back-end operations related to data and information management, streamlined workflows and processes around people’s needs, and enhanced online user interfaces. As a result, Saudi Arabia recently came up number 6 out of 193 countries in the 2024 United Nations E-Government Survey ranking.
To continue building on this remarkable achievement, the MCIT looked to the next big thing: AI. It wanted to answer an important question: Can we accurately forecast the impact of AI on a country’s economic growth and labor market performance? Â
MCIT produced a case study on Saudi Arabia to answer that question. While any analysis of this kind is subject to wide degrees of uncertainty because many of AI’s use-cases are still emerging, the results are encouraging. Â
To assess the overall impact of AI on GDP requires examining how industries and sectors are integrating it into their operations. The industries that do so make up the broad digital economy, which includes the production of ICT goods and services, digital platforms (like e-commerce, transport apps, and social media), and activities across sectors that are significantly enhanced by digital tools—for example, precision agriculture, smart manufacturing, fintech applications, and e-health.
In 2023, MCIT reported that the digital economy accounted for approximately 15% of Saudi Arabia’s GDP, while AI activities represented only a tiny fraction—about 1%—of that total. To forecast the likely impact of AI investments, they have relied on the Computable General Equilibrium (CGE) model of the Saudi economy that was developed in collaboration with our World Bank digital team through a two-year project that wrapped up in 2023.Â
These kinds of models are powerful macroeconomic instruments that capture the complex interactions between sectors, agents, and markets within an economy. They are grounded in microeconomic theory and built upon a system of interrelated equations that describe the behavior of economic agents, such as households, firms, the government, and the external sector (an aggregate representing the rest of the world with which there are import-export relationships) concerning production, investment, and consumption. In other words, these models help us understand how changes in one part of the economy—like investments made in AI—can ripple through and reshape everything else.
Specifically, MCIT estimates AI’s economy-wide impacts by assuming that it improves the efficiency of how factors of production such as capital and labor are employed. Taking a cautious approach, they equate this productivity improvement to AI’s current 2.3% contribution to the GDP produced in the Saudi high-tech sectors, ignoring future increases that can be expected as the technology matures. Within this framework, the CGE model can simulate early projections of multiple future scenarios based on the potential growth of Saudi AI markets. Â
Promising Results and a Path Forward
The results suggest that AI is likely to boost Saudi GDP growth significantly. For example, a scenario assuming a 20% yearly increase in the AI market from 2024 to 2030 projects GDP growth of 0.6% above the baseline during the same period. On the labor market front, simulations show that approximately 20.5% of jobs in Saudi Arabia are at risk of being fully replaced by AI. However, the potential for new job creation is 23%, leading MCIT to estimate that by 2030, the number of available jobs could increase by about 2.5%. These figures, while promising, are also subject to a high degree of uncertainty as AI technologies are still evolving and individuals and organizations need time to learn how to effectively use them. In November 2024, MCIT shared its experiences and findings at the IMF Statistical Forum in Washington.
Beyond the study’s scientific interest, the World Bank’s team is glad to see MCIT and Saudi Arabia taking an active role in public discussions about the economic impact of the AI revolution using analytical tools developed through our collaboration.
This work is part of our broader engagement with Saudi authorities. The World Bank remains committed to supporting Saudi Arabia with our technical advisory services as the country continues to innovate and adapt to globally changing digital and technological landscapes for better jobs and growth.