The world economy in 2050 and the growth of the emerging economies.

As mentioned in a previous post 28/1/2008 the world is changing and the new century looks like it will belong to the emerging economies and perhaps many countries that had not been thought of.

Pricewaterhouse Coopers LLP explored this in a report, entitled “The World in 2050: Beyond the BRICs (Brazil, Russia, India and China): a broader look at the emerging market growth prospects. This interesting analysis uses current data to examine the 17 largest economies and the 13 emerging economies and sets projections for 2050.

It supplants the current G7 ( US, Japan, Italy, UK, France, Canada, Germany) with a group of emerging country E7 (which includes China, India, Brazil, Mexico, Russia, and Turkey) projecting that the emerging economies will overtake them by 2050 by 50 percent.

In fact, China is seen to surpass the US by 2025, while India is seen to reach this level of growth by 2050. As mentioned in a recent post, China is already moving away from low-end manufacturing which is going offshore to places like Vietnam, Bangladesh and the Philippines, which interestingly form part of the top ten next wave of emerging nations. PwC projects that Vietnam will grow to 70 percent of the UK economy by 2050.

China surpassed the US last year to become the second largest exporter in the world behind Germany. PwC projects that by 2050 Brazil’s economy could be larger than Japan’s, and the Turkish economy be as large as Italy’s economy. Part of the reason put forward is the opportunity for increased internal investment and growth in wealth leading to growth in domestic consumption.

Another factor for the decline in western nations economic prospects is also linked to the decline in working populations or the effect of an ageing society. The replacement rate in countries like Italy and France are low and there are already some signs of economic pressure from the demands placed by the needs of pensioners. This element is also seen as a risk factor for development of countries like China who have mandated fertility policies. There seems to be no change from the one-child policy in the near future but this may change at some time.

The changes will see movement from low-skilled to more high tech industries in countries like China, while presently underdeveloped nations improve their skill base to move into low-end manufacturing. This will increase living standards and the capacity for increases in domestic consumption.

Where does this leave the current crop of OECD countries? The competition from the emerging economies will force OECD countries to move into niche areas of specialised technologies of high value or concentrate on commodities where possible and will require the retraining of their workforce to meet these specialisations.

The change in world position for China is demonstrated in an article from the Xinhua agency today reporting that the “World Bank seeks to work together with China as strong partners in Africa to tackle key challenges standing on the way to Africa’s sustained growth.” The article posits that from China holds huge promise for Africa, not just in terms of the enormous financial investment that it brings into energy, transportation, water and other related sectors, but also the technical expertise that comes with its own development of such world class infrastructure network. China’s example of development offers Africa scope for improvements in economic development especially if the problems of politics are able to be overcome. Many countries in Africa have the potential for growth and Nigeria is one of the list of emerging nations mentioned in the PwC report.

The world is changing, and sooner than we think. How our own countries fare will depend on understanding these global movements and being able to find areas of competitive advantage for our own economic growth. It will have to encompass demographic, financial as well as technological change. In the face of the challenges of global warming there is a lot to be done but also there are many areas of opportunity.

~ by abstraktbiblos on Thursday, 6 March, 2008.

3 Responses to “The world economy in 2050 and the growth of the emerging economies.”

  1. […] Original post by abstraktbiblos […]

  2. […] abstraktbiblos published an entertaining and interesting post on The world economy in 2050 and the growth of the emerging economies.See below for a small excerpt of the post: […]

  3. Linear projections and extrapolations are problematic. Thanks for the helpful link – will spend some time looking at PWC’s methodology.

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