In February 2017, PwC have published an important report on how will/could be the global economic order in 2050. The report, as very much rightly emphasized by the Chief Economist John Hawksworth, the report has been drafted by “taking a longer term view of global economic prospects that looks beyond the short-term ups and downs of the economic and political cycle, which are indeed very difficult to forecast”. By 2050 PwC project that China will be the largest economy in the world by a significant margin, and US of the second place will be replaced by India and Indonesia have risen to fourth place. One of the striking predictions is that the EU27’s share of global GDP could have fallen to below 10%. It is also claimed that the world economy will more than double in size between now and 2050, far outstripping population growth. The projected shift to E7 economies is worthwhile to note: in 1995 E7 were half of the size of G7 countries, in 2015 they were around the same size of G7 and in 2040 E7 economies could be doubled size of G7 economies.
Here are the key findings:
- It is projected that the world economy could more than double in size by 2050, assuming broadly growth friendly policies (including no sustained long-term retreat into protectionism) and no major global civilisation-threatening catastrophes.
- Emerging markets will continue to be the growth engine of the global economy. By 2050, the E7 economies could have increased their share of world GDP from around 35% to almost 50%. China could be the largest economy in the world, accounting for around 20% of world GDP in 2050, with India in second place and Indonesia in fourth place (based on GDP at PPPs).
- A number of other emerging markets will also take centre stage – Mexico could be larger than the UK and Germany by 2050 in PPP terms and six of the seven largest economies in the world could be emerging markets by that time.
- Meanwhile, the EU27 share of world GDP could be down to less than 10% by 2050, smaller than India.
- We project Vietnam, India and Bangladesh to be three of the world’s fastest growing economies over this period. UK growth has the potential to outpace the average rate in the EU27 after the transitional impact of Brexit has passed, although we project the fastest growing large EU economy to be Poland.
- Today’s advanced economies will continue to have higher average incomes, but emerging economies should make good progress towards closing this gap by 2050. This will open up great opportunities for businesses prepared to make long-term investments in these markets. But this will require patience to ride out the storms we have seen recently in economies like, for example, Brazil, Nigeria and Turkey, all of which still have considerable long-term economic potential based on our analysis.
- To realise this growth potential, emerging market governments need to implement structural reforms to improve macroeconomic stability, diversify their economies away from undue reliance on natural resources (where this is currently the case), and develop more effective political and legal institutions.
According to the projects GDP rankings (at PPPs) Turkey will climb up to the 11th position from its current position of 14th. Basar Yildirim, the Chief Economist for PwC Turkey “if Turkey can overcome its short term political uncertainties and focus its attention on reforms in all needed areas, the country can provide great long-term business opportunities with its favorable demographics and geopolitical position. According to our estimates, Turkey has the potential to grow at an annual average rate of around 3% over the next 34 years – the fastest of the European countries in this study – compared to 1.6% on average for the G7 countries. Therefore, the country is projected to become the world’s 14th largest economy as of 2030 in PPP terms and will reach 13th by 2050 if it manages to implement significant structural reforms. In this case, Turkey could also maintain its second position in 2050 within the E7 countries in terms of GDP per capita in PPP terms.”
For further details, please check the full report on the link below.
pwc-the-world-in-2050-full-report-feb-2017
Evren Erem, VIP Property
