Page 16 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Japan also recorded sustained expansion in manufacturing activity, supported by stronger industrial
production and improving new orders. However, manufacturers continued to face elevated input costs
driven by higher energy prices and yen depreciation, resulting in the sharpest increase in manufacturing
input prices in four years. In contrast, business conditions across the Eurozone and the United
Kingdom remained comparatively subdued. Manufacturing activity showed early signs of stabilization, but
weaker services activity, soft domestic demand, slowing export orders, and elevated operating costs
continued to restrain overall business expansion. Germany remained the weakest-performing major
economy, recording another month of contraction in overall business activity, while France continued to
experience sluggish demand despite modest improvements in manufacturing output.

2. Artificial Intelligence Emerges as a Key Driver of Global Productivity and Long-Term Growth- World
Bank

Artificial Intelligence (AI) is increasingly being recognized as a transformative force capable of reshaping
global economic growth and productivity over the coming decades. According to the World Bank's Global
Economic Prospects (June 2026), rapid adoption of AI technologies across industries could significantly
enhance labor productivity, improve resource allocation, accelerate innovation, and strengthen long-term
economic growth. If supported by appropriate policies and investments, AI could contribute to making
the 2030s one of the strongest decades for global growth since the early 2000s.

The growing emphasis on AI also reflects broader concerns over the prolonged slowdown in global
productivity growth. The World Bank notes that productivity growth has weakened considerably since the
early 2000s owing to ageing populations, weaker investment growth, slower capital accumulation, and
subdued innovation across several sectors. Against this backdrop, AI has emerged as a critical productivity-
enhancing technology, enabling automation of routine tasks, data-driven decision-making, and more
efficient production processes across manufacturing, services, healthcare, logistics, and energy.
Businesses are increasingly integrating AI into supply chain management, predictive maintenance,
industrial operations, and customer services to improve operational efficiency and reduce production
costs.

The rapid expansion of AI is also reshaping global energy demand and industrial supply chains. Growing
investment in data centers, cloud computing infrastructure, and high-performance semiconductor
manufacturing has significantly increased electricity consumption, particularly in advanced economies. At
the same time, demand for AI hardware is driving investment in semiconductors and critical minerals such
as rare earth elements, copper, lithium, and nickel, reinforcing the strategic importance of reliable
electricity networks, resilient energy systems, and secure mineral supply chains while creating new
opportunities for clean energy and grid modernization.

Despite its considerable potential, the economic benefits of AI are unlikely to be distributed evenly across
countries. Advanced economies are expected to benefit more rapidly owing to stronger digital
infrastructure, higher research and development expenditure, and a more skilled workforce. In contrast,
many emerging market and developing economies continue to face constraints related to digital

June 2026 Page | 15