Bank of Canada Sees AI as Possible Boost to Country’s Ailing Productivity

The Bank of Canada struck an optimistic tone on the economic impact of artificial intelligence, arguing that widespread adoption of the technology will boost the country’s ailing productivity without significant job losses.

In her first speech as external deputy governor, Michelle Alexopoulos extolled AI for its potential to increase output per hour worked, adding that it could also improve business competitiveness, boost wages for workers and create cost savings for consumers.

The productivity gains from AI depend on whether the technology ends up being the so-called general purpose type, like computers, where use spreads throughout the entire economy and create positive spillovers and structural change.

In a wide-ranging speech in Ottawa, she pointed to a bank survey in the financial sector, where many respondents said “AI use was improving productivity by automating routine tasks, allowing workers to focus on higher-value ones.”

She also pointed to studies that suggest that the pace of adoption has increased since 2022, with about 12% of Canadian firms using it in 2025. She highlighted an Indeed study that gauged the time-saving benefits of AI, in which workers said the technology “improved the quality and efficiency of their work.”

Alexopoulos said the bank expects some jobs to be replaced by AI, but also that “new jobs will emerge, and others will be transformed,” adding that officials are monitoring labor data for more evidence.

At the same time, she acknowledged that young people, particularly those in entry-level, customer service or coding jobs, are more likely to be impacted by AI adoption. External Deputy Governor Nicolas Vincent will delve into factors that may be affecting youth unemployment, including AI, in a speech on labor markets later this month, she said.

The bank has spoken bluntly about Canada’s lagging productivity, calling it an emergency in early 2024, and the comments on Wednesday suggest policymakers view AI as one potential fix.

Alexopoulos said the bank is already seeing small productivity gains from AI, and that’s already being accounted for as it calculates the pace of growth the economy can grow without stoking inflation.

“We are already incorporating limited gains into our projections and our estimates of potential output.”

She said decisions about interest rates aren’t set by artificial intelligence, though the central bank does use the technology to “sharpen” its insights, including “to help forecast inflation and economic activity.”

Photograph: The Bank of Canada building in Ottawa; photo credit: David Kawai/Bloomberg