Depends what you mean by economy.
Depends how long you want to survive.
If you mean a market based economy, where people trade things, then it is a very debatable question.
Artificial Intelligence has the potential to allow full automation of the manufacture and delivery and recycling of all the reasonable needs of all people. If that is done, then there is nothing that needs to be exchanged, and the concept of market economy dies (except for the very small fraction of things that are genuinely scarce, and cannot be substituted for something equivalent where the difference is below the detection capacities of human senses).
The idea that everything has a cost is nonsense.
Air has no market value, because it is universally abundant.
Anything that full automation can make universally abundant must have zero value in a market (by definition).
So it is strongly arguable that AI, and the weaker version of fully automated systems can in fact make the economy very much smaller, even as it meets all the reasonable needs of everyone.
One can also make a strong case that the current practices of erecting artificial barriers to universal abundance solely for the purpose of keeping the current market based economy working has reached the point of creating more risks than benefits (even acknowledging all the many levels of very complex and very important roles that market based systems currently play in our survival).
Once most people realize that most of the poverty they experience is there purely to keep the existing system running, and for no other reason, then the social pressures for change will be immense.
Some sort of universal basic income (that really is universal) can be a reasonable transition strategy that could prevent total collapse of the existing system for a couple of decades, but it is not a long term stable solution to what is a very complex suite of problems.
Long term, abundance based systems, and indefinite life extension, both universally available to all that want them, are essential if we want any significant probability of survival (both individually and as a species). And that is a very complex and deeply strategic set of problems.
So the short answer to the question is, it depends on how long you want humanity to exist. The more that competitive market based systems are used in guidance of our species, the lower the probability of our long term survival. We do in fact seem to have crossed a threshold into an entirely new strategic domain space (where we do in fact have the ability to threaten our own survival in an exponentially increasing number of ways).
We are the most cooperative species on the planet.
Everyone needs to understand that all new levels of emergent complexity are predicated on new levels of cooperation. Competitive systems always drive the system to some set of local minima on the complexity landscape.
The idea that evolution is all about competition is nonsense. (Possibly the most wrong and dangerous idea ever foisted on society.)
Certainly competition can be an important factor in evolution in some contexts, but if one is talking about complex systems (and we with our social systems are the most complex systems we know of), then it is true to say that their existence is predicated much more on cooperation than on competition. That is a mathematical and physical reality.
The fundamentalist belief that many have in competitive markets is now one of the greatest dangers we face. Certainly we need new mechanisms to effectively distribute all the important functions that markets currently distribute and network; and that is entirely doable.
We need systems that raise the minimum, without unnecessarily limiting the maximum. There can be enough for everyone to have what we would all consider a high standard of living, and still have some with a lot more than that. But we cannot keep a system that is predicated on scarcity for the majority (or even a minority) and expect to survive.