The World in 2050

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Global Economics January 2011

The world in 2050
Quantifying the shift in the global economy
With the rapid growth of the emerging markets, the global economy is experiencing a seismic shift. In this piece, we argue that this shift is set to continue. By 2050, the collective size of the economies we currently deem 'emerging' will have increased five-fold and will be larger than the developed world. And 19 of the 30 largest economies will be from the emerging world. At the same time, there will be a marked decline in the economic might – and potentially the political clout – of many small population, ageing, rich economies in Europe.

By Karen Ward

Disclosures and Disclaimer This report must be read with the disclosures and analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it

Economics Global 4 January 2011

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The world in 2050
 19 of the 30 largest economies will be emerging economies  The emerging economies will collectively be bigger than the

developed economies
 Global growth will accelerate thanks to the contribution from the

emerging economies

With the rapid growth of the emerging markets, the global economy is experiencing a seismic shift. But why is this change occurring? Will it continue? And how will the world look if it does? The answers to these questions are important for investors' decisions today. In this piece, we provide a framework for thinking about these issues. Based on our analysis of the Top 30 economies ranked by size of GDP in 2050, our conclusions are as follows:  World output will treble, as growth accelerates on the back of the emerging economies. On average, annual world growth is projected to be accelerate towards 3% compared with growth of just over 2% in the 2000s (Chart 1). Emerging-world growth will contribute twice as much as the developed world to global growth over this period.  By 2050, the emerging world will have increased five-fold and will be larger than the developed world (Chart 2).  19 of the top 30 economies by GDP will be countries that we currently describe as ‘emerging’ (Table 3).  China and India will be the largest and third-largest economies in the world, respectively.  Substantial progress up the global league table will be made by a host of other emerging economies – most notably, Mexico, Turkey, Indonesia, Egypt, Malaysia, Thailand, Colombia and Venezuela.  These projections combine prospects for per capita GDP and the demographic outlook. Income per capita should grow in all the countries that we consider. But demographic patterns vary significantly across the world and have a major influence on growth prospects.  The US and UK, with better demographic outlooks, are relatively successful at maintaining their positions.  But the small-population, ageing, rich economies in Europe are the big losers. Switzerland and the Netherlands slip down the grid significantly, and Sweden, Belgium, Austria, Norway and Denmark drop out of our Top 30 altogether.

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Economics Global 4 January 2011

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 This may have implications for the ability of these economies to influence the global policy agenda. Already Europe has been forced to concede two seats on the IMF’s executive board in order to make way for some emerging economies. This adds a whole new dimension to the current Eurozone crisis, and provides a significant incentive to euro-area countries to work through their current difficulties and remain a union.  Demographic change is even more dramatic outside of Europe. The working population will rise by 73% in Saudi Arabia and fall by 37% in Japan. That is reflected in these countries' differing fortunes in our top 30 table (Chart 4).  By 2050, the seismic shift in the global economy will have only just begun. Despite a seven-fold increase (Chart 5), income per capita in China will still be only 32% of that in the US and scope for further growth will be substantial. This ‘base...
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