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The Long View: How will the global economic order change by 2050?

Core Content Summary

By 2050, the global economic order is expected to undergo significant transformation, with emerging markets taking a dominant role in the world economy. This shift is projected to be driven by sustained economic growth, demographic changes, and structural reforms in these economies. The report outlines key trends, growth projections, and policy implications for both advanced and emerging economies.

Main Findings

• Global Economic Growth: The world economy is projected to more than double in size by 2050, assuming stable growth policies and no major global catastrophes. Annual average growth is expected to slow over time, from ~3.5% in the next four years to ~2.4% in the final decade.

• Emerging Markets Will Dominate: Emerging markets, particularly the E7 group (China, India, Indonesia, Brazil, Russia, Mexico, and Turkey), are expected to surpass the G7 (US, UK, France, Germany, Japan, Canada, and Italy) in economic power. By 2050, the E7 could account for nearly 50% of global GDP, compared to just over 20% for the G7.

• Top Economies in 2050: China is projected to be the largest economy by 2050 in PPP terms, followed by India, Indonesia, and the US. The UK and France will likely fall out of the top 10, while countries like Mexico, Brazil, and Indonesia are expected to rise significantly in the rankings.

• Fastest Growing Economies: Vietnam, India, and Bangladesh are predicted to be among the fastest-growing economies, with average annual GDP growth rates of around 5%, 4.9%, and 4.8%, respectively. Nigeria, Pakistan, and Egypt are also expected to make substantial progress.

• Income Convergence: Although advanced economies will still have higher average incomes, emerging economies are expected to close the income gap significantly. By 2050, the income gap between the US and China is projected to narrow to about double, while the gap between the US and India is expected to remain around three times.

• GDP Growth Components: GDP growth will be influenced by both population growth and real GDP per capita growth. For example, India's GDP growth will be driven largely by its large population, while its per capita growth will lag due to its lower starting point.

• Challenges for Emerging Markets: Emerging economies need to implement structural reforms, improve macroeconomic stability, diversify their economies away from natural resources, and strengthen political and legal institutions to sustain long-term growth.

Key Opportunities for Business

• Adaptability and Patience: Businesses should adopt flexible, dynamic, and patient strategies to succeed in emerging markets, which are expected to evolve rapidly.

• Market Potential: Emerging markets will offer significant opportunities as they develop and become more attractive for investment and talent.

• Local Adaptation: Understanding local markets, policies, and consumer preferences is crucial. Companies should work with local partners and adapt their strategies accordingly.

• Long-Term Engagement: Missing out on emerging markets means missing out on a large portion of global economic growth. Engaging early and with long-term vision is essential.

Structural Reforms and Policy Implications

• Institutional Development: Strengthening political, economic, legal, and social institutions is vital for generating innovation and entrepreneurship.

• Diversification: Emerging economies must move away from over-reliance on natural resources to ensure sustainable growth.

• Education and Investment: Investment in education and infrastructure is necessary to support population growth and ensure job creation for the working-age population.

• Climate and Demographics: Policymakers must address structural issues like aging populations and climate change to ensure long-term economic stability and growth.

Key Results Tables

• Table 1: Projected GDP at PPP rankings for 2016, 2030, and 2050 show a clear shift from G7 to E7 dominance.

• Table 2: Breakdown of GDP growth components highlights the importance of population and per capita growth in driving overall economic expansion.

• Table 3: GDP at MER rankings indicate that China will surpass the US in market terms, with India also rising significantly.

Conclusion

The global economic order is set to shift significantly by 2050, with emerging markets becoming the primary engines of growth. This transition will bring both opportunities and challenges, requiring strategic investment, policy reform, and adaptability from businesses and governments alike.