An artificial intelligence-driven productivity surge could ease pressure on debt-laden advanced economies, but economists caution it will not solve deep-rooted fiscal challenges. With public debt already exceeding 100% of GDP across most wealthy nations and projected to climb further due to ageing populations, defence spending and climate costs, AI-fuelled growth may only buy governments time rather than repair strained public finances.

Early estimates shared by the Organisation for Economic Co-operation and Development suggest that stronger productivity and employment gains from AI could reduce debt levels across member economies by about 10 percentage points from projected levels by 2036. In the United States, some economists see debt rising more slowly — to around 120% of GDP over the next decade — if AI meaningfully lifts growth and tax revenues. However, ratings agency S&P Global Ratings is not yet factoring in a major improvement in public finances.

Demographics remain the biggest constraint. Ageing populations and entitlement spending continue to drive debt higher, and uncertainty surrounds whether AI-led gains will translate into higher wages, employment and tax revenues. Economists warn that without fiscal discipline, even a sustained productivity boom may not offset mounting borrowing costs or prevent market pressure if growth disappoints.

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