By Daniel Hunter
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% of total global GDP.
The report indicates that the world economy is projected to grow at an average of just over 3% per annum from 2014-50 — doubling in size by 2037 and nearly tripling by 2050. 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, comments:
“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.”
The report also contains projections based on GDP at market exchange rates, without this relative price adjustment. On that basis, China is projected to overtake the US in around 2028, while India would clearly be the third largest economy in the world in 2050, but still some way behind the US.