Middle East could reach US$4.68 trillion in GDP by 2035 under trust-based AI and climate action, PwC study finds

PwC’s Value in Motion study, issued in July 2025, sketches a future for the Middle East in which AI-driven productivity gains and decisive climate action could lift the region’s GDP to about US$4.68 trillion by 2035 under a “trust-based transformation.” The analysis models three trajectories for AI adoption, climate policy, and reform, and it notes an AI-led uplift of roughly 8.3% to GDP over 2023–2035, but warns that decarbonisation costs could trim growth by around 5.2% through stranded assets. A US$232 billion gap separates the best and worst outcomes, underscoring how much rides on policy design, governance, and investment choices.

The framework frames three futures. In the optimistic, trust-based transformation, the region’s economies collaborate more effectively and weave AI responsibly across sectors while accelerating climate resilience, with GDP reaching about US$4.68 trillion by 2035. In the tense transition, growth stays solid but uneven, with GDP around US$4.61 trillion as progress stalls in parts of the economy. The most constrained path, turbulent times, foresees weaker AI benefits and higher decarbonisation costs, with GDP near US$4.45 trillion. The study stresses that the 8.3% productivity uplift from AI is not automatic; its full realisation depends on how well AI is integrated with climate strategies, energy transition efforts, and broader reforms.

A striking element of the analysis is the interaction between AI potential and climate obligations. While the trust-based route promises substantial gains, decarbonisation costs are projected to subtract about 5.2% from GDP due to stranded assets and the near-term energy transition burden. Yet the report also flags upside from green technologies, renewable-powered data centres, green fuels, and circular-economy approaches, which could offset some of the decarbonisation drag and reinforce long-term productivity.

Governance and policy play pivotal roles in realising the upside. PwC argues that public–private partnerships will be essential to scale energy and digital infrastructure, de-risk major investments and accelerate delivery. Targeted incentives such as tax breaks, grants, and preferential procurement policies are highlighted as levers to stimulate domestic innovation — particularly in AI chips, data centres, and climate-tech manufacturing. Workforce development is listed as a critical enabler, with emphasis on AI education, green skills, and digital literacy to ensure a steady talent pipeline for a rapidly changing economy.

Signals from the region in recent months align with the trust-based transformation path. The UAE’s regional leadership, strong digital infrastructure, and proactive governance are cited as enabling factors that could magnify AI’s impact while stabilising energy costs through an accelerated energy transition. Across the Gulf Cooperation Council, confidence in AI among CEOs appears higher than global averages; PwC’s CEO surveys indicate that many leaders already trust AI to a significant degree. Among those regional organisations that have adopted GenAI, a large majority report gains in time efficiency and profitability, reinforcing expectations that AI will become core to platforms, processes, and product development in the coming years.

The value of regional collaboration is further underscored by policy and investment considerations. The report stresses that governance frameworks must be clear and robust to harness AI safely and ethically, thereby strengthening public trust and reducing risk for investors. Public–private partnerships are repeatedly highlighted as a vehicle to accelerate the energy and digital infrastructure needed to realise the AI productivity gains. And because the Middle East sits at the intersection of abundant energy resources and ambitious decarbonisation goals, the framework notes opportunities to stabilise energy costs and unlock new growth through climate-resilient industries.

Looking ahead to 2035, the indicators of success go beyond headcount or headline GDP. Analysts say the true test will be sustained productivity improvements from AI, measurable progress in climate resilience, diversification of economic activity away from single-commodity dependence, and high levels of trust in institutions and technology. The projection for the optimistic path assumes ongoing collaboration among governments, businesses, and civil society, a climate policy environment that aligns with growth, and sustained investment in human capital and digital infrastructure.

In addition to the regional focus, the analysis places the Middle East in a broader context of technology leadership and energy transition. The value chain implications are significant: continued investment in AI capabilities, data infrastructure, and advanced manufacturing could attract further capital, while climate action and energy resilience may help moderate volatility in energy prices and create new adjacent industries. Taken together, the findings present a nuanced roadmap: AI can unlock substantial productivity gains, but only if governance, energy transition, and people development move in concert.

As policymakers and industry leaders weigh the options, the overarching message is clear. The region’s economic ascent hinges on a trust-based approach to AI adoption, robust climate action, strategic public–private collaboration, and a shared commitment to developing human capital. If these pieces align, PwC’s framework suggests the Middle East could not only reach a higher GDP tally by 2035, but also build a more resilient, diversified economy designed to thrive in an AI-enabled, climate-aware world.

Source: Noah Wire Services