IMF Working Papers

The discussion on Artificial Intelligence (AI) often centers around its impact on productivity, but macroeconomic evidence for Europe remains scarce. Using the Acemoglu (2024) approach we simulate the medium-term impact of AI adoption on total factor productivity for 31 European countries. We compile many scenarios by pooling evidence on which tasks will be automatable in the near term, using reduced-form regressions to predict AI adoption across Europe, and considering relevant regulation that restricts AI use heterogeneously across tasks, occupations and sectors. We find that the medium-term productivity gains for Europe as a whole are likely to be modest, at around 1 percent cumulatively over five years. While economcially still moderate, these gains are still larger than estimates by Acemoglu (2024) for the US. They vary widely across scenarios and countries and are sustantially larger in countries with higher incomes. Furthermore, we show that national and EU regulations around occupation-level requirements, AI safety, and data privacy combined could reduce Europe’s productivity gains by over 30 percent if AI exposure were 50 percent lower in tasks, occupations and sectors affected by regulation.