The world in 2050

Emerging markets are growing three times as quickly as those in the developed world and are poised to make up 19 of the world’s top 30 economies by 2050.

In a ‘crystal ball study’ for a view of the world in 2050, HSBC senior global economist Karen Ward endeavoured to establish the stage of development at which emerging economies had arrived and whether they had the potential to catch up.

Their sustainable growth depends on income, human capital, and government policies and rule of law and current growth rates played no role in Ms Ward’s projections.

Ms Ward – who gave the same presentation a day earlier at an HSBC Bank Malta business breakfast which also featured HSBC’s Germany-based Bernhard Esser who dealt with foreign exchange trading – demonstrated how many large emergers are still in early stages of development.

Income per capita in China was seven per cent that of the US; in India it was just two per cent. Individual income growth in China is projected to grow by 800 per cent by 2050 (India by 600 per cent) but, despite the ‘explosion’ it would still remain at a third of the US’s.

Developed economies face considerable demographic headwinds – Japan, for instance, has lost 20 years of non-performance while emergers were gearing up to power global growth particularly through their population enlargement in contrast with Europe’s aging population.

But is there enough energy for all this growth, Ms Ward asks in the study. The US and China currently demand more than two billion tonnes of oil equivalent, with India still lagging far behind at around 700 million tonnes.

By 2050, China’s energy demand will explode to over seven billion tonnes and India will demand roughly what the US demands today. The US, through greater use of alternative energies as in the rest of the West, will demand less than four billion tonnes.

At current production rates, the world had around 50 year of oil supply left. Rising incomes have resulted in 700 million cars on the road – by 2050 an extra billion cars were expected to join the world’s fleet, mainly because emerging countries like China only had 22 cars to every 1,000 people whereas the US had 450.

Car demand will place the most pressure on oil, the scarcest fuel. Renewables do have the potential to solve energy security issues but the cost poses the biggest problem.

Ms Ward stressed it is imperative economies identified ways to grow without demanding such high levels of energy and making increasing use of alternative fuels.

“We are still in the early days of the developing markets’ growth story,” Ms Ward pointed out. “The growth is sustainable but there is a long way to go.

“World output has the potential to treble by 2050 and it will be driven by the emerging markets: 19 of the top 30 economies will be those we currently deem as emerging.

“To reach this potential, we need to change the way we use energy. There are solutions but these are neither cheap nor quick to install.”