The global economy will grow at an average rate of around 2.6% and the long-term global economic power shift away from the established advanced economies is set to continue as emerging market countries continue to boost their share of world GDP.
These are two of the key findings from the latest PwC ‘World in 2050’ report which presents projections of potential GDP growth up to 2050 for 32 of the largest economies in the world.
The report projects that the world economy could double in size by 2042, growing at an annual average real rate of around 2.6% between 2016 and 2050. This growth will be driven largely by emerging market and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of around 3.5% over the next 34 years, compared to only around 1.6% for the advanced G7 nations of Canada, France, Germany, Italy, Japan, the UK and the US.
By 2050 the Chinese economy will be 30% larger than the next largest economy, India (measured at PPP - see note 1). India will also overtake the US to become the second largest economy and Indonesia will move up to the world’s seventh largest economy.
PwC Australia Chief Economist Jeremy Thorpe said there are important considerations for Australia as we see global economic power shift further towards Asia and away from Europe and the US, and that low growth will become the new norm for our economy.
“Globally we will continue to see the shift in economic power away from established advanced economies towards emerging economies in Asia. The E7 could comprise almost 50% of world GDP by 2050, while the G7’s share declines to only just over 20%.”
“By 2030 the nine largest Asian economies will comprise more than 50% of the GDP of the largest 32 countries,” Mr Thorpe said.
“Emerging countries will create many opportunities for businesses as these countries progress into new industries, engage more with world markets and their populations get wealthier.
“The key opportunity for Australia is to leverage our proximity to Asia. We need to lift our eyes beyond China to also focus on the the fast growing emerging economies such as India, Indonesia, the Philippines, Vietnam and Thailand, and we should be thinking about how we will best capitalise on the increased demand for goods and services right across our region. That’s where the bulk of economic growth will be in the next thirty years.”
Commenting on the forecast for Australia Mr Thorpe said: “Australia’s forecast average annual growth rate of 2.3% is lower than our historic average performance. We may need to accept that low growth is the new norm for Australia.
“However, lower growth puts pressure on our standard of living. To address this, and be globally competitive, Australia must remain an attractive place to do business, have a tax system that isn’t out of step with the rest of the world, and prioritise more focused investment to lift our education and skills performances.
“To succeed, Australia needs to focus on engaging effectively with the emerging Asian economies,” Mr Thorpe concluded.
Key PwC ‘World in 2050’ Findings
Latest PwC report projects that for GDP measured at purchasing power parities (PPPs):
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