The global economic power shift away from the established advanced economies in North America, Western Europe and Japan will continue over the next 35 years – despite a projected slowdown in Chinese growth after around 2020.
This is one of the key findings from the latest report from PwC economists on ‘The World in 2050: Will The Shift in Global Economic Power Continue?’
This presents long-term projections of potential GDP growth up to 2050 for 32 of the largest economies in the world, covering 84 per cent of total global GDP.
The report indicates that the world economy is projected to grow at an average of just over three per cent per annum from 2014-2050 – doubling in size by 2037 and nearly tripling by 2050.
There are different ways of comparing the size of economies, but we project that China will be the largest economy by 2030 on any measure
But there’s likely to be a slowdown in global growth after 2020, as the rate of expansion in China and some other major emerging economies moderates to a more sustainable long-term rate, and as working age population growth slows in many large economies.
John Hawksworth, PwC chief economist and co-author of the report, says: “There are different ways of comparing the size of economies, but we project that China will be the largest economy by 2030 on any measure.
“However, we also expect its growth rate to slow markedly after around 2020 as its population ages, its high investment rate runs into diminishing marginal returns and it needs to rely more on innovation than copying to boost productivity. Eventual reversion to the global average has been common for past high growth economies such as Japan and South Korea and we expect China to follow suit.
“India has the potential to sustain its higher growth rate for longer and become a $10 trillion economy by around 2020 in purchasing power (PPP) terms, or around 2035 at market exchange rates. But this relies on India making sustained progress on infrastructure investment, institutional reforms and boosting education levels across the whole population.”
PwC also estimates what its projections would mean for shares of global GDP at PPPs.
China’s share of world GDP is projected to flatten off at around 20 per cent from the mid-2020s onwards as its growth rate reverts to the global mean.
The US’s share declines gradually from around 17 per cent now to around 14 per cent by 2050, while India’s potentially doubles from around seven per cent now to be more or less neck and neck with the US by the middle of the century in PPP terms.
The EU’s overall share of world GDP is projected to decline from around 17.5 per cent now to only around 12 per cent by 2050, assuming that total EU GDP grows at the same rate as the aggregate for the largest seven EU economies covered by the study.
“Europe needs to up its game if it not to be left behind by this historic shift of global economic power, which is moving us back to the kind of Asian-led world economy last seen before the Industrial Revolution. The US may hold up better, provided it can remain at the global technological frontier,” Hawksworth concludes.