PwC’s 'The Long View' lays out global growth projections – until 2050 – for 32 of the world’s largest economies.
- By 2050, emerging markets will account for six of the world’s top 10 economies. Emerging economies have been on a positive growth trajectory for years. Despite China's recent slowdown, PwC projects that by 2050 it will be the world’s largest economy, accounting for 20% of global GDP.
- Of the world’s economies, Vietnam, India, and Bangladesh are expected to witness the most growth from now until 2050, with Mexico, the Philippines, and Nigeria also expected to gain ground. In recent years we have seen small emerging economies draw in more foreign direct investment as larger emerging economies experience rising costs, resulting in lower competitiveness. The long-term opportunities for businesses in smaller emerging economies are huge.
- In terms of GDP, expect India and China to overtake the US and Europe as the world’s greatest economic powerhouses: By 2050 the EU’s member states are expected to have a share of global GDP amounting to less than 10%.
The report mostly aligns with
“In the long run, we are all dead” – John Maynard Keynes
According to PwC, annual global economic growth will drop from 3.5% in 2020 to 2.4% by 2050. This deceleration is being attributed to a fall in the working-age populations of advanced economies coupled with a rise in the younger populations that typically characterise emerging economies. Such a shift will have a marked effect on immigration and implies that advanced economies will have to continue importing skilled – and possibly unskilled – labour to maintain economic growth in the near term despite ongoing debates over immigration and employment.
Nigeria on the rise
The report also notes Nigeria’s diversification efforts. Foreign direct investment has shifted from the oil sector towards power, agriculture, mining, and, increasingly, retail, the latter due to the rapidly growing consumer class. Further growth of the manufacturing industry is also expected due to the development of transport infrastructure. With the country having suffered notably over the past two years
Despite ongoing chatter about the ‘catastrophic’ effects of Brexit on the UK, it seems PwC has taken the stance that, in the long run, the UK still holds strong macroeconomic fundamentals – given the continuing inflow of talent, of course. According to the report, “the UK’s position is sustained by its relatively larger projected
Institutions take centre stage
The report highlights a key – but continually under-analysed – feature of economic growth: The importance of institutions.
The root of macroeconomic imbalance is often found in ineffective governments and governance. Clearly, the lesson here for emerging economies is that numbers alone do not lead to positive outcomes. Institutional change will always be critical.
The report includes a discussion with
- Technological change; and
- Domestic economic policies.
The case for vocational training
Emerging markets could take note of the German dual education system, which engages students in vocational training and formal school lessons, thereby instilling in them theoretical and applied skills. This is an important issue often overlooked by general economic forecasts that focus on labour and jobs. Education will have to change significantly in order to feed the employment needs of 2050.
The actual realisation of growth figures in PwC’s report depends on some uncertain structural factors. For example, the authors mention that “Nigeria will only realise [its] potential if it can diversify its economy away from oil and strengthen its institutions and infrastructure”.
Neither does PwC’s long-term growth model take political factors or global exogenous shocks into account. The key factors of its model are historical GDP growth, demographics, human capital, physical capital, technological progress, and real market exchange rates.