Emerging Markets Economic Outlook & Strategy: Artificial Intelligence and the EM Growth Divide

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Emerging Markets Economic Outlook & Strategy: Artificial Intelligence and the EM Growth Divide

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24 Jul 2026 10:01:09 ET │ 107 pages

Emerging Markets Economic Outlook

& Strategy

Artificial Intelligence and the EM Growth Divide

Johanna Chua AC

CITI'S TAKE +852-2501-2357

johanna.chua@citi.com

There are only a few potential EM winners (Taiwan, Korea, Singapore) in the

US-led AI capex cycle, but if the 1990s IT revolution were any guide, Ernesto Revilla AC

prospects for future productivity gains could accrue more to the “users” +1-212-816-2621

versus “producers”. Here too, EM looks relatively disadvantaged vs DM, as ernesto.revilla@citi.com

AI adoption prospects remain highly correlated with per capita GDP through

digital-infra/skills, and occupational structure’s readiness for AI disruption. Gina Schoeman AC

China’s lower-cost “frugal stack” could accelerate AI diffusion across EM +27-11-944-0813

but its benefits are likely to be unevenly distributed to a few. It is too early to gina.schoeman@citi.com

assess labor-market effects, but abundance of young job-seekers in Africa

AC& Asia is a challenge. AI could narrow the skills-gap between DM and EM, Yuanliu Hu

but overall effects are unlikely to be large enough vs displacement and +852-2501-2746

commodification of lower skilled tasks. India’s business process

outsourcing services export growth remains very resilient, while Philippines’ yuanliu.hu@citi.com

ACis slowing sharply. Luis E Costa, CFA

The rapid growth of AI technologies could disadvantage most of EM vs DM led by +44-20-7986-9757

US. China is the only EM economy in the AI frontier producer stack, but even there, luis.costa@citi.com

the effects are not large enough to offset domestic demand weakness. If the 1990s