AI Could Transform Jobs and Economies Across Arab Region by 2035, New UN Report Warns

Artificial intelligence (AI) is expected to dramatically reshape labour markets, industries, and economic systems across the Arab region over the next decade, creating both major opportunities and serious risks depending on how governments and institutions respond, according to a new report released by the United Nations Economic and Social Commission for Western Asia (ESCWA) and the International Labour Organization (ILO).

The report, titled “Artificial Intelligence and Employment Futures for the Arab Region,” was launched during a special preparatory session ahead of ESCWA’s Arab Forum for Sustainable Development (AFSD). The session brought together regional experts, policymakers, labour specialists, and international organisations to examine how AI could influence employment patterns, economic growth, and social inclusion throughout the Arab world.

According to the study, AI technologies are already beginning to transform industries across the region, affecting job structures, skills requirements, and productivity levels. The report warns that these changes are expected to intensify significantly by 2035 as automation, generative AI, and digital systems become more integrated into workplaces and public services.

While AI could create substantial economic growth and new employment opportunities, the report cautions that without proper planning and investment, technological disruption could also deepen inequality, increase unemployment among vulnerable groups, and widen existing social and economic divides.

Researchers outlined three possible future scenarios showing how AI adoption could shape the region’s economies depending on government preparedness, workforce development, and policy responses.

In the first scenario, rapid AI adoption is matched by strong investment in workforce transition programmes, education reform, and digital skills training. Under this model, AI could contribute nearly 25 percent of regional GDP by 2035, helping economies absorb disruption while generating new opportunities in high-value sectors. However, even in this optimistic scenario, millions of existing jobs could still disappear due to automation and labour market restructuring.

A second scenario presents a more concerning outlook, where technological change advances faster than workforce preparedness. In this case, AI could contribute approximately US$375 billion to regional GDP by 2035, but large numbers of lower- and middle-skilled workers could face prolonged unemployment, downward mobility, and worsening inequality.

The third scenario envisions a more gradual and coordinated integration of AI technologies, supported by inclusive policies and labour market reforms. Under this pathway, countries could still achieve strong productivity gains while expanding opportunities in sectors such as tourism, logistics, education, healthcare, and digital services. The report estimates annual AI-driven economic growth in Arab economies could range between 20 and 34 percent per year under this balanced approach.

The report highlights that automation is likely to affect clerical and routine jobs most heavily, while demand is expected to increase for workers with advanced digital, technical, analytical, and creative skills.

At the same time, experts warn that the region already faces a serious skills mismatch problem.

According to the report, the gap between education systems and labour market requirements currently ranges between 40 and 70 percent in some Arab countries, underscoring the urgent need for major reforms in education, vocational training, and lifelong learning systems.

The report stresses that governments and social partners must take proactive steps now to prepare societies for the transition.

Key policy priorities identified include:

• Investing in future-ready education systems

• Expanding lifelong learning opportunities

• Strengthening labour market institutions

• Enhancing social protection systems

• Updating labour regulations

• Developing ethical governance frameworks for AI in workplaces

The findings were central to discussions during the AFSD preparatory session titled “Shaping the Future of Work in the Arab Region: Artificial Intelligence and Employment Pathways.”

The session examined how AI could affect different demographic groups, including young people, women, and low-skilled workers, who may face varying levels of risk and opportunity from technological change.

ILO Regional Director for Arab States Ruba Jaradat said the impact of AI is no longer a future concern but an immediate reality already affecting workplaces across multiple sectors.

“AI is not a distant prospect. Its impacts are already being felt across sectors, from public administration to services and beyond,” Jaradat said.

She noted that nearly 25 percent of occupations in the Arab region could be affected in some way by generative AI technologies, whether through job displacement, job transformation, or the creation of entirely new occupations requiring advanced skills.

Jaradat emphasised that the overall impact of AI will depend heavily on the policy choices made by governments today.

“At the ILO, our mandate is to ensure that technological change advances decent work, social justice, and inclusion rather than undermining them,” she said.

Experts participating in the discussions stressed the importance of stronger cooperation between governments, employers, workers’ organisations, educational institutions, and technology sectors to ensure a fair and inclusive transition.

The report concludes that AI has the potential to become either a powerful driver of economic transformation and sustainable development or a source of deeper social fragmentation if countries fail to invest in inclusive policies and workforce preparedness.

As digital transformation accelerates globally, the Arab region faces a critical moment in determining how emerging technologies will shape the future of work, economic growth, and social stability in the decades ahead.