AI and climate action could boost Middle East economy by $232 billion
The Middle East’s economy could see an additional $232 billion by 2035 if the region fully embraces AI and takes decisive action on climate change, according to new research from PwC and Strategy&.
As countries around the world look for ways to deal with the increasingly costly reality of climate change, technology is invariably a major part of any new solution. From extreme heat to drought, few other regions are as much at risk as the Middle East. The time to lead is now for leaders in the MENA region, emphasize PwC and strategy subsidiary Strategy&.
AI could boost the combined GDP of the Middle East by over 8% and averting climate risks would see the region avoid huge monetary losses. The significant growth projected in the report stems from an ideal scenario in which both scenarios play out: Widespread AI adoption boosts productivity and climate risks are effectively managed through bold sustainability initiatives.
There is already a set of sustainability goals in place, especially in the GCC countries. Those include the UAE’s goal to reach net-zero emissions by 2050 and Saudi Arabia’s Vision 2030, which stipulates 50% renewables by 2030, to later reach net zero by 2060. The GCC countries are rapidly shifting away from fossil fuels by diversifying into other sectors, but oil still remains a huge part of the region’s economies.
Interplay of AI and climate action
Proactively putting AI and sustainability initiatives into gear will have clear benefits – but there is also the other side of the coin: If Middle Eastern countries fail to act, the huge risks involved would spell big trouble for local economies.
While a business-as-usual approach could see the Middle East’s real GDP grow by 41.8% by 2035, the negative impact of climate risks like heat waves and water scarcity could reduce this growth by nearly 14 percentage points, leading to a GDP of $4.57 trillion.
However, the most optimistic outlook projects that widespread AI adoption could add 8.3% to GDP through productivity gains. When combined with strong climate action, this could elevate the region’s GDP to $4.68 trillion by 2035, marking a potential increase of up to $1.11 trillion from today’s $3.57 trillion.
“The decade ahead will challenge the region’s imagination and capabilities like never before,” said Stephen Anderson, Chief Strategy & Technology Officer at PwC.
“To stay ahead, businesses and governments must act with pace, purpose and partnership – reimagining traditional models to unlock the competitive advantage the region is uniquely positioned to deliver.”
The research also introduces a new framework focusing on ‘domains of growth’ such as how we move, fuel, build, and care. These cross-industry ecosystems are expected to reshape traditional sectors, creating new opportunities for businesses to innovate and form cross-sector alliances.
The report highlights the Middle East’s unique position, with bold climate commitments, access to the world’s lowest-cost renewable energy, and rapidly advancing AI infrastructure. This combination could allow the region to become a global hub for sustainable, tech-driven economic growth, especially as clean energy is vital for powering AI infrastructure such as data centres.
“A critical factor will be the interplay between the cost and scalability of AI and the availability and affordability of clean energy needed to power it, especially as AI adoption accelerates in the region at an unprecedented pace. Striking the right balance between these priorities will be essential,” said Yahya Anouti, Partner with Strategy&.
Public-private partnership
Governments, business leaders, and academia need to collaborate in the domains of AI and sustainability. Governments should rethink institutions around evolving human needs, potentially establishing new ministries and funds for AI adoption in public services.
Indeed, in terms of government agencies, this has already begun: In 2020, the UAE founded the Ministry of State for AI, Digital Economy and Remote Work Applications, and KSA founded the Saudi Data and AI Authority (SDAIA) in 2019. The UAE also has a Ministry of Climate Change and Environment, which focuses on environmental protection.
The PwC and Strategy& report urges business leaders to reinvent their operations for a more localized, digital, and low-carbon economy, while strengthening supply chains and cross-sector partnerships. Academia, meanwhile, should focus on developing top talent, advancing applied research, and fostering entrepreneurship within the education system.
“With its ambitious visions and world-leading capabilities, the Middle East has an unprecedented opportunity to lead the next wave of global economic transformation,” concludes the report. “The time to lead is now.”
