We have been staring into our crystal ball, or to be more precise, PricewaterhouseCoopers have been getting their slide rules out to predict what the global economy will be like in 2050. The conclusions: over the next 45 years India will be the fastest growing economy, and by one measure at least, China will overtake the US and becomes the worldâ€™s largest economy. As for the UK, by 2050 it will be relegated to eighth or ninth place behind the US, China, India, Brazil, Japan, Mexico and Indonesia. Projections suggest the British and Germany economies will be roughly same size by then.
The PWC report also said that the seven new emerging superpowers of the world economy (thatâ€™s China, India, Brazil, Mexico, Indonesia, Russia and Turkey) will boast a combined economy which is larger than the current G7.
GDP data is a little like a cat’s hide. You can skin the figures in more than one way.
The obvious method is to measure GDP by a currency, say the dollar. But that method doesnâ€™t always tell the true story. Sometimes goods, and in particular services, are cheaper in some countries than others. Over time the gap should be closed for some products by the effect of competition and the Internet providing almost perfect information. But, for some services, such as a haircut, the international price mechanism for levelling prices just doesn’t work. And to take account of this, PWC uses a measure known as Purchasing Power Parity. It concluded, by the PPC measure Chinaâ€™s economy is already five times bigger than the UKâ€™s, and Indiaâ€™s economy overtook the UK some time ago. And by the Purchasing Power Parity index, China will be almost half as much again bigger than the US by 2050, and the Indian and US economy will be the same size.
By 2050, the Russian and French economies are expected to be of a similar size, and Turkey is expected to have caught up with Italy.
This does not mean, of course, that the average Chinaman will be wealthier than the average citizen of the US. GDP per capital looks at average Gross Domestic product. And by this measure, of the worldâ€™s 17 largest economies, the UK will have the second highest GDP per capita. Itâ€™s currently in third place, behind Japan.
A key factor behind the projected growth is expected changes in population. India, followed by Turkey and then Brazil are expected to see the biggest percentage rise in working population. Japan, South Korean and Italy will see the biggest fall. But the current eurozone should see big falls across the board with France, Germany and Spain all joining Italy with a substantial percentage shrinkage in the size of the working population.
But the US is expected too see working population growth, whilst back in Blighty, the change is expected to be neutral, with neither growth nor contraction.
Bear in mind, that these population figures relate to the absolute size of the working population, and take no account of working versus retired population.
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