Develop or Divide: AI’s Implications for Emerging Economies

Since the launch of OpenAI’s ChatGPT in November 2022, AI has consumed media discourse, both in its celebration, and in worries over the consequences of such a technology. A 2025 global study by the University of Melbourne and KPMG found that while 66% of people report regular use of AI, only 46% of people globally are willing to trust AI systems. Despite this, the latest United Nations Human Development Report identifies an anomaly. Emerging economies are not only more aware of the opportunities AI presents, but are also more optimistic about them than their developed counterparts. Is this optimism misplaced? Or are there genuine positive opportunities for developing economies?

I will start with the dangers that AI may pose for emerging economies. First is the concern that AI will widen the development gap between the global north and south, with less developed economies falling ever further behind. This concern stems from scepticism over the ability of developing governments to adapt to and adopt AI in their current state. Oxford Insights’ 2024 AI readiness index reports developing economies as often holding an index rating below the global average, particularly the economies of sub-Saharan Africa, central Asia and central America. This threat is compounded by the potential for job displacement and labour market disruption, particularly in low skilled or routine-based work, which has already been observed in a World Bank study. This found that robot adoption displaced 1.4 million low skilled jobs in five ASEAN nations, while creating 2 million jobs in skilled, formal work. This demonstrates the danger to low skilled work common in developing economies, often in manufacturing and industry - a potentially worrying indicator of what is to come for these nations.

A final, more speculative factor is the increasing concern over seemingly cyclical deals between AI companies and tech giants, provoking worrying comparisons to the 2000s dot-com bubble. Is it possible that recent investment in AI is fuelling yet another speculation bubble, irrational exuberance and inflated confidence? 

If so, a burst could be detrimental to developing economies, with an overnight drying up of investor funds and incalculable disruption to the increasing number of governments - like Albania, which recently adopted an AI minister in an attempt to eliminate corruption in the country - using AI as a means of national development.

While it is true that developed economies certainly hold the advantage in research and development of AI technologies, it is perhaps not the technologies themselves, but their application that will be more significant in the long run. Considering this, it becomes easier to see the revolutionising potential of AI in emerging markets.

One example is that lower costs and barriers to entry have the potential to leapfrog traditional development solutions – reducing poverty and promoting economic prosperity. Recent findings from the International Finance Corporation allege that AI applications can address challenges faced by individuals in the bottom 40 percent of the income distribution through AI-as-a-service solutions. 

The paper highlights some key examples of AI’s positive impact, such as the machine-learning app PlantVillage Nuru, widely used by farmers across Africa and South East Asia to recognise and track crop pests and diseases using their smartphone, allowing for real time diagnosis and improving revenue and yields. One farmer experienced a 55% increase in revenue and 146% yield increase in one season.

We must also consider the labour market implications for these economies – will they be replaced by AI, or enhanced? A recent IMF paper examined the impact of AI on both advanced economies and emerging markets, accounting for AI’s potential as either a substitute or complement to assess labour market impacts. It found that advanced economies would face higher exposure than emerging markets, with more of these jobs being replaceable. Thus, thanks to a lower employment share in professional and managerial occupations, emerging markets like those of Brazil and India are more sheltered from labour market shocks than those in advanced economies which often have a service sector focus. 

AI growth finally provides the simple benefit of export revenue for the emerging economies which often supply essential materials. Markets like China and Taiwan are primary sources of much of the material used in the development of chips, computers and electrical boards - all essential to the AI industry. This gives these markets the opportunity to establish new industries, leading to job creation, output boosts, and FDI attraction. There may also be associated political opportunities, allowing these economies to leverage geopolitical power with developed, tech-reliant economies like the USA, Japan or the EU.

Beyond this, a possible AI bubble remains an existential threat to the future of AI-led development. If it materialises, as some fear, it could extinguish any hopes for prosperity in these regions before they even get off the ground. 

AI clearly has a massive potential to benefit emerging economies, accelerate development and improve living conditions at rates previously unheard of. With IMF research suggesting that emerging economy labour markets are likely to be less affected than developed economies, we can remain optimistic that AI will indeed bridge the gap, rather than widen it. Even small-scale applications of artificial intelligence, like that of Nuru, have proven to be revolutionary. These successes are however dependent on the efficient and effective introduction of these measures.