China has already overtaken the US as the world’s most powerful economy and India will have displaced it to third position by 2050, according to the accounting and professional services group PwC.
In its newly-published report, entitled ‘The Long View: How Will the Global Economic Order Change by 2050?’, the group ranks 32 countries by their global gross domestic product (GDP) measured by purchasing power parity (PPP) for 2016 and projects the rankings for the years 2030 and 2050.
For 2016, India occupies third position with a PPP of US$8,721bn, a figure that is forecast to increase fivefold to US$44,128bn by the middle of the 21st century. Although the so-called BRIC emerging economies of Brazil, Russia and India and China are expected to dominate the ‘top six’ global economies of 2050, PwC is particularly bullish on prospects for Indonesia, which the report suggests will have risen to fourth position.
By contrast, the developed economies of Japan, Germany and the UK will be towards the bottom of the ‘top 10’ of 2050. However, before then the world economy will have doubled in size. PwC expects this to have occurred by 2042, with the world economy “growing at an average annual rate of just over 2.5% between 2016 and 2050”.
“Emerging economies offer great opportunities for business – the numbers in our report make it clear that failure to engage with these markets means missing out on the bulk of economic growth we expect to see in the world economy between now and 2050,” said John Hawksworth, chief economist at PwC.
“To succeed, businesses will need to adopt strategies with the right mix of flexibility and patience to ride out the short-term economic and political volatility that is a normal feature of emerging markets as they mature.
“Growth is expected to be driven largely by emerging market and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of 3.5% over the next 34 years, compared to an average of just 1.6% for the advanced G7 nations of the US, Canada, France, Germany, Italy, the UK and Japan.
However, growth will depend on a number of social and geopolitical issues being addressed. “The global economy faces a number of challenges to prosperous economic growth in the long-term,” said Hawksworth. “Ageing populations and climate change require forward-thinking policy which equips the workforce to continue to make societal contributions later on in life and promotes sustainable development.
“Falling global trade growth, rising inequality and increasing global uncertainties are intensifying the need to create diversified economies which offer opportunities for everyone in a broad variety of industries.”
France is forecast to drop out of the top 10 to 12th place in 2050, making place for Mexico.
Rankings are significantly different when economies are ranked by GDP per person; regarded as a better gauge of how growth is translating into changes in living standards.
Based on that measure, the US is still the world’s leading economy and remains so in 2050 followed by Germany, the UK and Canada, although China and India will be steadily closing the income gap with those at the top, according to PwC’s projections.
“In 2016, US GDP per capita was almost four times the size of China’s and almost nine times the size of India’s. By 2050, these gaps are projected to close to around double China’s and around three times India’s, demonstrating long-term income convergence,” the report states.
Table 1: Projected rankings of economies based on GDP at PPPs (in constant 2016 $bn)
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