Emerging economies will drive global economic growth by 2050 with India outpacing the U.S. as world's second largest economy.

World Economy 2050

Wondering where your country will rank in economic power in 2050? A report by PwC uncovers a world 30 years from now where China and India top the list and Indonesia, Russia, and Mexico play important role in the world economy.

Top 10 world economies in 2016 and 2050

Top 10 world economies in 2016 and 2050.
Source: PwC

What are the key findings of the survey:

  • The world economy is forecast to grow two-fold in size by 2050, provided that world political leaders are able to avoid sustained long-term retreat into protectionism. Which however should not be taken for granted in the light of recent political developments in leading world countries.
  • Emerging markets will power the global economic growth and by 2050, the E7
    economies –  the group of emerging market economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey – will account for some 50% of world GDP compared to around 35% in 2016. China could produce around 20% of world GDP in 2050, making it by far the most powerful nation world nation in terms of GDP at PPPs (gross domestic product at purchasing power parity that adjusts for price level differences across countries ).
  • Mexico is to outpace UK and Germany by 2050, while six of the seven largest economies in the world are expected to be emerging markets at the end of the period.
  • The EU27 share of world GDP could shrink below 10% by 2050.
Relative size of G7 and E7 economies between 2016 and 2050
GDP at PPP: Gross domestic product at purchasing power parity GDP at MER: Gross domestic product 

What the report effectively says is that you should invest in emerging economies if you seek fast growth in the next couple of decades. Countries like Vietnam, India and Bangladesh will top the list in terms of rapid economic developments with Brazil, Nigeria and Turkey also having good growth potential that is obscured by political uncertainties.

In Europe, Poland is projected to grow fastest among the large European economies while Britain is considered a good bet after the passing of the transitional impact of Brexit.

Global growth projections to 2050

Annual average growth in the E7 will stand at 3.5% between 2016 and 2050, compared to G7’s growth half that figure at around 1.6% per annum.

China will account for some 20% of the world GDP, followed by India with 15% while the U.S.’s share of world GDP will decrease to around 12% by 2050. The United States could still outpace Indonesia by 2050 – Indonesia is expected to make the greatest progress in the next three decades – but will trail India that will be the second largest world economy in PPP terms.

GDP per capita in PPP terms for G7 and E7 economies in 2016 and 2050.

Vietnam, India and Bangladesh could witness annual average growth of around 5% over the next 30 years. Continuous economic reforms and diversification of Nigeria’s economy could result in average annual growth of around 4% per annum, moving from 22th place to 14th largest world economy.

By 2050, only two EU economies will find their place in the top 10 – Germany and United Kingdom, which are projected to occupy 9th and 10th place, respectively.

Risks to growth

PwC have developed three world growth scenarios that involve possible downside risks:

Scenario 1: Trend annual US labour productivity growth decrease by 0.5 percentage points, from 1.5% to 1%, representing a deceleration in global technological progress within the structure of the model;

Scenario 2: Convergence speeds for total factor productivity (TFP) levels reduce by half, and annual US labour productivity growth decrease by 0.5 percentage points;

Scenario 3: Investment to GDP ratios decrease by a quarter, convergence speeds (for TFP levels) decrease by half, and annual trend US labour productivity growth decreases by 0.5 percentage points.

Average annual growth rate of G7, E7 and the world economy taking into account risk factors.

All of the above scenarios may have significant impact on the projected growth estimations while political instability may deter investment in emerging markets, dampening the rate of catch-up.

Natural disasters and continuing climate change may result in slower growth in some developing countries, while major scientific advancements – mostly in the field of energy production and sustainable energy – could boost growth.

The most severe downside scenario (Scenario 3) predicts world average annual growth rate decrease by 0.75 percentage points, with the size of the world economy in 2050 being around 22% smaller compared to the main scenario.

In any case, the world could be a bit different in 2050 and you might want to change your current location for at first glance unexpected destinations like Indonesia or India although present developed economies will still have acceptable quality of life indicators.

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