China is already the world’s largest economy according to some measures and India is poised to take the number spot within the next 30 years, according to a report.
PwC’s study said China had overtaken the US to be largest economy based on GDP in purchase power parity (PPP) terms – one common measure of an economy’s comparative size.
But if measured according to market exchange rates (MER), another important standard, the US remains the world’s largest economy. There is no clear benefit in using one measure over the other, PwC said.
But even using MER standards China will overtake the US by 2030.
And India will overtake the US by 2050 to go into second place, regardless of measurements, while Indonesia could elbow advanced economies such as Japan and Germany aside and move into fourth place by 2050.
PwC used its own long-term global growth model, first developed in 2006, to predict that the world economy could double in size by 2042, growing by 2.5% annually between 2016 and 2050.
The E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey will grow at an annual average rate of around 3.5% over the next 34 years, compared to only around 1.6% for advanced G7 nations.
John Hawksworth, PwC chief economist and co-author of the report, said: “The E7 could comprise almost 50% of world GDP by 2050, while the G7’s share declines to only just over 20%.”
By 2050 the report predicts Indonesia and Mexico will be larger than Japan, Germany, the UK or France, while Turkey could overtake Italy.
“In terms of growth, Vietnam, India and Bangladesh could be the fastest growing economies over the period to 2050, averaging growth of around 5% per year,” the report said.
If Nigeria can shift itself away from oil dependence and strengthen institutions and infrastructure, it has the potential to move eight places up the GDP rankings to 14th by 2050.
Colombia and Poland are projected to be the fastest growing large economies in their respective regions.
However, today’s advanced economies will continue to have higher than average incomes and, with the possible exception of Italy, G7 countries will continue to sit above the E7 countries in terms of GDP per capita.
Convergence of income levels across the world is likely to continue well beyond 2050 with China gaining middling average income level by 2050 while India will remain in the lower half of the income range, given its low starting point.
“While strong population growth can be a key driver of total GDP growth, it will take much longer to eliminate differences in average income levels,” said the report.
Global economic growth will average around 3.5% per year to 2020 but it will slow to around 2.7% in the 2020s, 2.5% in the 2030s and 2.4% in the 2040s, as many advanced economies experience a marked decline in their working age populations.
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