AI Boom Won't Save Indebted Nations
The current AI boom will be no "free pass" for major, debt-laden economies, according to a Japan Times analysis. High debt levels and demographic pressures may limit the productivity gains from new technology, even as emerging markets surge ahead.
Even with a significant AI-driven productivity surge, Organisation for Economic Co-operation and Development (OECD) countries would see their national debt lowered by only 10 percentage points from the projected 150% of GDP by 2036. This would still be a sharp increase from the current average of 110%. The primary obstacle is demographics. In G20 advanced economies, aging populations could increase the public debt burden by an average of 180% of GDP over the next 30 years due to rising costs for pensions and healthcare. By 2050, the old-age dependency ratio is projected to hit 71% in Japan and 66% in Italy. This demographic drag means that even with AI, the real GDP growth over the next three decades could be 50% lower than in the previous 30 years for developed economies if productivity rates don't see a substantial increase. This is a significant headwind that technology alone may not overcome. In contrast, many emerging markets are focusing on AI for growth rather than cost-saving. Firms in Southeast Asia are giving two to three times more attention to AI for revenue management compared to their European counterparts who focus on productivity and efficiency. This positions them to capture new market opportunities. Some emerging economies are becoming central to the AI ecosystem. Taiwan now dominates over 90% of the global market for advanced semiconductor manufacturing, essential for AI development. In August 2025, Taiwan's exports surpassed those of South Korea for the first time, largely driven by the demand for AI-related technologies. South Korea, in turn, holds a dominant position in the high-bandwidth memory (HBM) chip market, another critical component for AI. Together, Samsung and SK Hynix controlled over 95% of the global HBM market in the first quarter of 2025. Proactive national strategies are also a key differentiator. The UAE, with its National AI Strategy 2031, is investing heavily to become a global AI hub and is the only Arab nation to join Japan's Hiroshima Artificial Intelligence Process Friends Group for global AI regulation. This focus on strategic growth is attracting investment. Southeast Asia is projected to see a $950 billion increase in its regional GDP due to the influx of AI-related businesses, benefiting from a more relaxed regulatory environment compared to the EU's stricter AI Act.
