Digital Transformation, AI Efficiency, and Sustainable Development: Evidence from MENA Economies

This study investigates the impact of digital transformation and artificial intelligence (AI) on sustainable development outcomes in MENA economies over the period 2010–2023. It employs a dynamic panel data approach using the System Generalized Method of Moments (System GMM) estimator to address endogeneity, unobserved heterogeneity, and persistence effects. The findings indicate that digital transformation is the primary driver of sustainable development, exerting a stronger and more consistent effect compared to AI. This highlights the role of digital infrastructure as a foundational enabler of sustainability transitions. In contrast, AI shows a positive but weaker impact, reflecting its complementary and maturity-dependent nature within the digital ecosystem. The results also reveal significant regional heterogeneity, with GCC countries exhibiting stronger effects than non-GCC economies. This disparity is explained by differences in institutional quality, digital infrastructure, and absorptive capacity. Overall, the study demonstrates that sustainable development in MENA economies is driven not only by technology adoption but also by the interaction between digital infrastructure, AI, and institutional readiness.