The mass of world economic activity would well and truly shift to Asia in the coming decades with the Indian economy projected to grow at 8.5 per cent, much faster than China’s 6.8 per cent and behind only Vietnam’s 9.8 per cent, global consulting firm PriceWaterhouseCoopers (PwC) said in a latest report. <b1>
By 2050, India’s economy would be as large as 90 per cent of United States and China becoming even bigger.
According to the report, India rather than China tops the growth league table, a reflection of India’s working age population, which is projected by UN to continue to grow at a healthy rate unlike China.
There is also greater scope for productivity and education levels to rise across Indian population, enabling the country to catch up with Organisation of Economic Cooperation and Development (OECD) countries in the long run, it said.
“The global centre of economic gravity is already shifting to China, India and other large emerging economies and our analysis suggests that this process has a lot further to run. Our latest projections suggest that China could overtake the US in around 2025 to become the world's largest economy and will continue to grow to around 130 per cent of the size of the US by 2050,” it said.
Brazil seems likely to overtake Japan by 2050 to move into fourth place, while Russia, Mexico and Indonesia all have the potential to have economies larger than those of Germany or the UK by the middle of this century.
“But the fastest mover could be Vietnam, with a potential growth rate of almost 10% per annum in real dollar terms that could push it up to around 70% of the size of the UK economy by 2050,” PwC head of Macroeconomics John Hawksworth said.
The report also highlights that there are many other alternatives worth considering, depending on the nature of the investment and the risk tolerance of the investor.
Nigeria, while high-risk, has the long-term potential to overtake South Africa to be the largest African economy by 2050. The Philippines, Egypt and Bangladesh also have high growth potential but also high risk levels. But with the possible exception of Vietnam relative to Turkey, the additional analysis does not change the conclusion from earlier PricewaterhouseCoopers research that the E7 will remain the largest emerging economies through to 2050.
Hawksworth said rapid growth of the emerging economies does not mean the demise of the established OECD economies. In fact it should prove to be a boost for them through growing income from exports and overseas investments, even as the OECD share of world GDP declines, he said.