A new report from TD Economics says that while advancements in AI technology could help the Canadian economy address long-standing productivity issues, its potential for growth will depend on its implementation. 

TD Senior Economist Rannella Billy-Ochieng’ and Economic Analyst Anusha Arif said in a report Tuesday that AI offers a potential “remedy” to Canada’s productivity issues. The report said that weak investment has contributed to productivity issues, but a larger issue has been the “slowing rate of technological change.” 

“Canada’s unique AI ecosystem provides a good starting position for us to ride this industrial growth wave, but poor adoption policies and weak AI preparedness may derail this opportunity,” the report said. 

“In the more optimistic scenario, the adoption of AI across industries could lead to an output increase of five to eight per cent over the baseline over the next decade.” 

Recent advances in AI technology are now “manifesting with great speed,” the report said, and some experts predict AI to be a key technology “of the next Industrial Revolution.” 

“Generative AI – a general purpose technology with the ability to mimic cognitive skills – has the potential to be one of the most influential innovations of the fourth Industrial Revolution,” the report said. 

“These technologies will change the way we work, and by helping workers become more efficient, will foster greater economic growth.” 

Despite the potential productivity gains from AI implementation, the report highlighted that Canada has a globally competitive AI ecosystem. However Canadian businesses have comparatively poorer AI adoption rates relative to U.S. peers.

“The absence of widespread adoption and commercialization of AI among businesses could stand in the way of Canada fully capitalizing on this nascent opportunity,” the report said. 

The report detailed that Canada’s total factory productivity, which measures changes in economic output that don’t come from increased inputs, began slowing in the 1960s.  

According to the report, total factory productivity has weighed on labour productivity for the past two decades.

TD’s report follows widespread concerns about the nation's lagging economic productivity. In March, Bank of Canada Senior Deputy Governor Carolyn Rogers described the issue as an economic emergency. 

Last month Mark Wiseman, the former Canada Pension Plan Investment Board (CPPIB) CEO, said that while the federal government’s 2024 budget focuses on redistribution, more attention should be given to productivity-related issues.