PwC Global recently compiled a report that predicts how the global economic order will change by 2050. The report takes into account the fundamental drivers of growth, demographics and productivity by country in terms of international trade and investment.
The analysis reveals that China may be the largest economy in the world by 2050 by a ‘significant margin’ and India may take second place, edging past the United States. The UK looks to be one of the steadiest economies in terms of its place in the global economic order. Despite Brexit, the UK will only drop from the ninth largest economy in the world to the 10th by 2050. Germany will drop in the GDP rankings from fifth to ninth, while France will drop from the top 10 completely; coming in at 12th.
Interestingly, PwC also predicts that emerging economy Indonesia will have risen to fourth place.
The global economic growth during this period will be driven by emerging market economies—such as China, Nigeria, Colombia, Turkey and Poland—and is projected to grow at an average of 2.6 percent each year if the world economy is to double by 2050.
A shift in economic power
In fact, the PwC predicts that the global economic order by 2050 will shift from the more advanced G7 economies (Canada, France, Germany, Italy, Japan, the UK and the US) to the E7 nations (Brazil, China, India, Indonesia, Mexico, Russia and Turkey). Over the next 34 years, the E7 economies are looking to grow at an average rate of around 3.5 percent per year, compared to just 1.6 percent for the established G7 economies. Having said this, all of the G7 economies besides Italy will continue to sit above the E7 group in terms of rankings of GDP per capita by 2050. The G7 economies will experience a ‘marked decline in their working-age populations’, the PwC report said, causing the predicted decline in their economic growth.
According to PwC, the share of the world’s GDP (according to PPP’s) will change dramatically in the years from 2017 to 2050. The EU’s share of GDP is expected to fall from 15 percent to just 9 percent and the US’s share from 16 percent to 12 percent. Meanwhile, China will increase from 18 percent of the world’s total GDP to 20 percent and India from 7 percent to 15 percent.
In the period from 2017 to 2050, Vietnam, India and Bangladesh could be three of the world’s fastest growing economies, PwC predicts. Nigeria could be the largest growing African economy, potentially moving up the GDP rankings from 22nd to 14th place by 2050 as the global economic order changes. However, the nation may only be able to realise this potential if ‘it can diversify its economy away from oil and strengthen its institutions and infrastructure.’
The reason for such a boost in economic growth with the emerging economies by 2050 will be because of their fast-growing populations, ‘boosting domestic demand and the size of the workforce.’ For this to be viable, however, the growing population must be supplemented with investment in education and their governments ensuring there are sufficient jobs for young people.
Business opportunities with emerging economies
These rapid and fast developing economies hold huge opportunities for business in the G7 group for the future. As the E7 economies move up in the global economic order and develop their institutions, social stability and increase their engagement with world economies, they will become more attractive to do business with. Businesses should revise their business models and strategies to suit alternative local preferences if they want to take advantage of the emerging economies over the coming decades.
Achieving sustainable economic growth as the global economic order changes by 2050 requires structural reform. Governments must ‘implement growth-friendly policies that attract businesses, investment and talent,’ PwC has reported. This includes supporting the fluid movement of goods and services around the world, supporting development of education, and empowering the ageing working population.
For more information, see the complete PwC report: The Long View: How Will the Global Economic Order Change by 2050
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