The combined size of the seven biggest emerging market economies (E7) is likely to exceed the combined size of the seven biggest developed economies (G7) within a decade.
So predicts global industry assurance, tax and advisory services group Pricewaterhouse-Coopers (PwC) in a report released on Friday and entitled “The World in 2050”. The company credits the global financial crisis with accelerating this process.
On the basis of purchasing power parity (PPP) calculations of gross domestic product (GDP), the E7 (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) will collectively overtake the G7 (the US, Japan, Germany, UK, France, Italy and Canada) in 2017. If the E7 and G7 GDPs are calculated in market exchange rates (MERs), then the overtake point comes later – 2032.
Regarding individual countries, and using PPP calculations, PwC forecasts than China will overtake the US in 2018 to become the world’s biggest economy, while India will overtake Japan (to become the number three economy) even sooner – this year (2011), in fact. Russia will overtake Germany in 2014, Brazil will overtake the UK in 2013, Mexico eclipse France in 2028, Indonesia overhaul Italy in 2030 and Turkey overtake Canada in 2020.
India could overtake the US, relegating the American economy to third place, in 2050.
Again, if the GDP calculations are made in MERs, the overtake points come later. Thus, China would overtake the US in 2032, India pass Japan in 2028, Russia overhaul Germany in 2042, Brazil go ahead of the UK in 2023, Mexico pass France in 2046, Indonesia overtake Italy in 2039 and Turkey would exceed Canada in 2035.
PwC points out that, as MER calculations can be extremely volatile and tend to underestimate the size of emerging and developing economies, economists often prefer to use PPP calculations to make international comparisons. In the case of both sets of calculations, the dates predicted are estimates and, the company warns, are subject to “many uncertainties”.
Concerning the G20 group, which includes both the biggest developed and emerging economies, the forecast is that by 2050 Australia and Argentina are likely to have dropped out of its ranks, and could be replaced by Vietnam and Nigeria.
“In many ways,” states PwC chief economist John Hawksworth, “the renewed dominance by 2050 of China and India, with their much larger populations, is a return to the historical norm prior to the Industrial Revolution of the late 18th and 19th centuries that caused a shift in global economic power from Asia to Western Europe and the US – this temporary shift in power is now going into reverse.”
The report highlights that the greatest increase in a single country’s share of global GDP is forecast for India, and not China. In MER terms, India accounted for 2% of global GDP but by 2050 this could reach 13%.
However, the per capita PPP GDPs of Brazil, China and India will continue to lag far behind those for the US, UK and of G7 as a group, to (probably well) beyond 2050.
Regarding South Africa, PwC expects this country’s economy to grow at an annual average real rate of some 3,8% from 2010 to 2050. Over the same period, Nigeria’s annual average real growth rate is forecast to be about 6,5%.