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Report: Generative AI can boost Estonia’s GDP by up to 8%. Minister Riisalo: potential for digital disruption ahead

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According to a recent report commissioned by Google and prepared by Implement in cooperation with the Estonian Government, generative AI could contribute up to €2.5 – 3 billion or 8 per cent to Estonia’s GDP yearly, if widespread adoption is achieved.

Estonia’s Minister of Economic Affairs and Information Technology Tiit Riisalo believes that – “if we are ready” –  8 per cent in the peak year of adoption is achievable. This is approximately equal to the proportions of the gross national product (GDP) currently spent on education and defence combined, meaning that this readiness can bring huge rewards.

Estonia to surf the generative AI tsunami

“Is there potential to be ready?” the minister rhetorically asked in his speech at the Finnish-Estonian Business Forum, last week’s event that this year focused on how artificial intelligence can be used to promote business ties between the two neighbouring countries.

“Of course, there is,” Riisalo states. However, according to the report, a 3 to 5 per cent contribution to the GDP can be expected even with limited adoption.

Riisalo compares the recent rise of artificial intelligence with a tsunami or a series of ocean waves caused by a sudden and violent seafloor disturbance. According to the minister, when such a tech tsunami occurs, countries can either be overwhelmed by the waves or “if we know how to surf and have a surfboard at hand,” we can grab the surfboard and “reach amazing new heights.”

Being ready for generative AI may involve different concepts and solutions. According to the minister, one example of this readiness is exchanging information with other countries through the open-source data exchange layer solution, X-Road. Several other examples are related to data collection and benefitting from the data: Estonia’s genome bank, managing and studying genetic data collected from the Estonian population for scientific research purposes, and the existence of digital medical records. Medical data and new technologies can create unique capabilities that few other countries possess.

Digital disruption ahead

In the future, 61 per cent of Estonia’s workforce is predicted to work together with generative AI. A gradual change will occur, where less than 10 per cent of highly exposed jobs will be replaced by automation. At the same time, new jobs will be created in the AI-powered economy. While the report expects employment levels to stay similar to today’s, a rise in productivity is expected. Referring to previous studies, the report states that, for example, firm-level AI adoption typically increases productivity by 2-3 per cent.

The report sees the most potential for generative AI in knowledge-intensive business services, related to finance, legal affairs, science and information. Here, generative AI has the potential to contribute up to 0.75 billion euros annually. Equal benefits of 0.5 billion are seen for trade, transport and tourism; public administration and health care; and manufacturing, construction, energy and water sectors. The benefits of agriculture, forestry, fishing, and mining are predicted to be an additional 0.25 billion.

Smart choices needed to excel in artificial intelligence

While in Estonia, as well as the rest of the European Union, small and medium enterprises lag behind in AI adoption, generative AI could boost this. As generative AI helps mitigate the need for large datasets, it is generally easy to use and available online, meaning that huge investments in infrastructure are not needed. Small and medium-sized businesses are essential drivers of economic growth.

But what is needed for all these things to happen? According to the report, investment in artificial intelligence research and development is needed, together with promoting widespread adoption and universal accessibility and building the workforce needed by the new situation, including general and targeted upskilling and reskilling.

“What we see is that there is potential for a digital disruption,” the minister concludes.

Not only is the government optimistic about the next steps for Estonia as a digital state, but “The crazy days of AI began 500 days ago,” said an IT visionary and one of the architects of Estonia’s current IT success story, Linnar Viik. “Since then, the new gold rush is taking place. And the stakes are high!”

Generative AI or generative artificial intelligence is a class of artificial intelligence algorithms designed to generate new, original content based on patterns and data it has been trained on.

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