By Samia Milhem
Since 2019, the World Bank has been actively working with Saudi authorities to enhance the country’s digital sector, a collaboration that continues as the adoption and use of artificial intelligence (AI) accelerate at a remarkable pace worldwide.
The goal of this partnership has been to transform the digital experience for people in Saudi Arabia, streamlining daily online transactions and improving government services. To achieve this, the World Bank has collaborated with four key governmental institutions, providing technical assistance to:
- The Ministry of Communications and Information Technology (MCIT)
- The Saudi Digital Government Authority
- The Saudi Data and Artificial Intelligence Authority
- The Digital Cooperation Organization
Notably, these efforts have yielded tangible results. Saudi Arabia has successfully implemented major reforms that have revolutionized the production and delivery of public services through digital means.
These reforms have enhanced data management services, simplified workflows, and improved user interfaces, making online transactions more efficient. As a result, Saudi Arabia recently ranked sixth out of 193 countries in the 2024 United Nations E-Government Survey.
Building on this significant achievement, the MCIT set its sights on the next major step: leveraging artificial intelligence. The ministry sought to answer a critical question: Can we accurately predict the impact of AI on economic growth and labor market performance in a country?
To explore this, the MCIT conducted a case study on Saudi Arabia. Although such analyses are inherently uncertain—given that many AI applications are still emerging—the findings were encouraging.
AI’s Contribution to Saudi Arabia’s Economy
Assessing AI’s impact on GDP requires analyzing how industries integrate AI into their operations. The sectors that adopt AI form the backbone of the digital economy, which includes:
- The production of IT and communication goods and services
- Digital platforms (such as e-commerce, ride-hailing apps, and social media)
- Industry-specific digital enhancements, such as precision agriculture, smart manufacturing, fintech applications, and e-health services
In 2023, the MCIT reported that the digital economy accounted for approximately 15% of Saudi Arabia’s GDP, with AI-related activities making up just 1% of that figure.
To forecast AI’s potential impact, the MCIT relied on a computable general equilibrium (CGE) model of the Saudi economy. Developed in collaboration with the World Bank’s digital task force over a two-year project ending in 2023, CGE models are powerful macroeconomic tools that track complex interactions between sectors, market participants, and economic forces.
These models, grounded in microeconomic theory, describe the behaviors of economic agents—including households, businesses, government entities, and external trade partners—in terms of production, investment, and consumption.
In essence, CGE models help us understand how changes in one area—such as AI investments—ripple through the economy, influencing various sectors and actors.
AI’s Projected Economic and Employment Effects
The MCIT’s estimates assume that AI enhances the efficiency of key production factors, namely capital and labor.
Under a conservative approach, the ministry projected that AI currently contributes 2.3% to the GDP of Saudi Arabia’s advanced technology sectors—excluding expected growth as these technologies mature. The CGE model can simulate multiple future scenarios based on the potential expansion of AI markets in the country.
Findings suggest that AI is likely to significantly boost Saudi Arabia’s GDP growth. For instance, under a scenario where the AI market grows at an annual rate of 20% from 2024 to 2030, GDP is projected to rise by 0.6% above the baseline over the same period.
On the labor front, simulations indicate that approximately 20.5% of jobs in Saudi Arabia could become obsolete due to AI automation. However, the potential for job creation stands at 23%, leading the MCIT to estimate a net employment increase of 2.5% by 2030.
While these figures are promising, they remain subject to considerable uncertainty. AI technologies are still evolving, and individuals and businesses require time to adapt to them effectively. In November 2024, the MCIT shared its findings and insights at the International Monetary Fund’s Statistical Forum in Washington, D.C.
Beyond the academic and policy implications of this study, the World Bank team is pleased to see Saudi Arabia and the MCIT actively contributing to public discourse on AI’s economic impact—using analytical tools developed through international cooperation.
This initiative is part of the broader collaboration between the World Bank and Saudi authorities. As Saudi Arabia continues to pursue innovation and adapt to global digital and technological advancements, the World Bank remains committed to providing advisory and technical support to help foster job creation and economic growth.
