In one of those rankings of economic fortunes that politicians and others like to cite, PwC has predicted that two of the BRICs will leave the US behind between now and the middle of the century.
China already has the biggest economy in the world when based on purchasing power parity terms and will still be there in 2030 with the US remaining in second place. By the middle of this century, China will remain number one, with India second and the US falling to third slot.
So at least predicts PricewaterhouseCoopers, as it gazes into its crystal ball to figure out which countries will be the economic giants as the decades unfold and which ones, at least in relative terms, will fall behind. Some of the predictions may not be surprising if current growth trends are extrapolated over the decades, while others might be more surprising – even contentious.
In 2014, the rankings, in declining order, are: China, the US, India, Japan, Germany, Russia, Brazil, France, Indonesia, and the UK. By 2050, the rankings are: China, India, the US, Indonesia, Brazil, Mexico, Japan, Russia, Nigeria and Germany.
PPP estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.
The PwC report presents long-term projections of potential GDP growth up to 2050 for 32 of the largest economies in the world, covering 84 per cent of world GDP.
The report indicates that the world economy is projected to grow at an average of just over 3 per cent per annum from 2014-50, doubling in size by 2037 and nearly tripling by 2050. The organisation reckons there is 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.
“We expect China’s 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,” John Hawksworth, PwC chief economist and co-author of the report, said. “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."
At the bottom end of the PPP rankings of the 32 economies in 2014 is Vietnam, while in 2050, the Netherlands will occupy that slot.
(Editor’s comment: The rankings do not, of course, necessarily state which of the countries will see the fastest growth in the number of high net worth individuals, or what levels of wealth and income/spending inequality will be, or for that matter, quality of life. It is interesting that Nigeria is expected to be in 10th place by 2015, ahead of some developed nations now. One hopes that in some ways the rise in Nigeria’s expected fortunes is mirrored by a commensurate improvement in that country’s endemic problem of corruption, not to mention a cessation of the horrors engulfing part of that country now due to the actions of Islamist militants. Russia is seen in eighth place by 2050 – one assumes Western sanctions will have been a historical memory by then. In other words, all such data barely scratch the surface of the forces driving wealth creation. It may be that some of the fastest growing countries over coming decades surprise us.)