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China, the United States, and India will be the three largest economies by 2050, with Brazil overtaking Japan in fourth place, according to the latest update of PwC’s “The World in 2050” series of reports.

The report, which seeks to update projections of potential growth in GDP in leading economies over the period to 2050,  finds that the global financial crisis and its aftermath has accelerated the shift of the economic center of gravity to China, India, and other emerging economies.

It concludes that the emerging economies are set to grow much faster than the G7 (France, Germany, Italy, Japan, the UK, the U.S. and Canada) over the next four decades.

Average growth in GDP in purchasing power parity (PPP) terms show Nigeria leading the way over the period from 2012 to 2050, followed by Vietnam, India, Indonesia, Malaysia, China, Saudi Arabia, and South Africa.

And in PPP terms, the E7 (Brazil, Russia, India, China, Indonesia, Mexico and Turkey) group of large emerging economies could overtake the G7 before 2020. China could overtake the U.S. as early as 2017 on the same basis.

“The global financial crisis has hit the G7 much harder than the E7 in the short term,” John Hawksworth, chief economist at PwC, said. “And it has also caused downward revisions in the estimates of longer term trend growth in the G7—particularly those economies in Europe and the US that had previously relied on excessive public and private borrowing to drive growth.”

Beyond the largest economies, the report argues that Malaysia has considerable long-term growth potential, while Poland could continue to outpace its Western European neighbors for some decades to come. These two economies were included in the analysis for the first time this year.

More generally, it is not just the BRICs that have strong long-term growth potential. Other emerging economies such as Indonesia, Mexico, Turkey, Nigeria, Vietnam, and South Africa also have good prospects if they can continue to pursue growth-friendly economic policies.

PwC said the top 20 economies of 2011, based on estimates by the World Bank, are led by the U.S., followed by China, India, Japan, Germany, Russia, Brazil, France, UK, Italy, Mexico, Spain, South Korea, Canada, Turkey, Indonesia, Australia, Poland, Argentina, and Saudi Arabia.

The PwC’s projected top 20 economies by 2050 are as follows:

  1. China
  2. U.S.
  3. India
  4. Brazil
  5. Japan
  6. Russia
  7. Mexico
  8. Indonesia
  9. Germany
  10. France
  11. UK
  12. Turkey
  13. Nigeria
  14. Italy
  15. Spain
  16. Canada
  17. South Korea
  18. Saudi Arabia
  19. Vietnam
  20. Argentina

The report also cites a number of sources that could derail emerging market growth, such as high fiscal deficits in India and Brazil, over-reliance on oil and gas revenues in Russia and Nigeria, rising income inequality leading to social tensions in China and other fast-growing economies, and macroeconomic and financial instability in Vietnam.

“The shift in the global economic centre of gravity is clear; but there are still major challenges for the emerging economies to sustain their recent strong growth,” said Hawksworth. “At the same time, there are huge opportunities for Western companies in the emerging markets—but also great competitive challenges from fast-growing emerging market companies.”


Photo: IvanWalsh.com

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