JEDDAH: ARAB NEWS
Published — Thursday 7 February 2013
Last update 7 February 2013 1:18 am
The world economy is projected to grow at an average rate of just over 3 percent per annum from 2011 to 2050, doubling in size by 2032 and nearly doubling again by 2050.
China is projected to overtake the US as the largest economy by 2017 in purchasing power parity (PPP) terms and by 2027 in market exchange rate terms. India should become the third 'global economic giant' by 2050, a long way ahead of Brazil, which is expected to move up to 4th place ahead of Japan, according to a report by PricewaterhouseCoopers.
Russia could overtake Germany to become the largest European economy before 2020 in PPP terms and by around 2035 at market exchange rates. Emerging economies such as Mexico and Indonesia could be larger than the UK and France by 2050, and Turkey larger than Italy.
Outside the G20, Vietnam, Malaysia and Nigeria all have strong long-term growth potential, while Poland should comfortably outpace the large Western European economies for the next couple of decades, the PwC said in its report "World in 2050: The BRICs and beyond: Prospects, challenges and opportunities.
The PwC report updated its long-term global economic growth projections, which were last published in January 2011. These are based on a PwC model that takes account of projected trends in demographics, capital investment, education levels and technological progress.
“We can see that emerging economies tend to grow at 4 percent per annum or more, while advanced economies grow at around 2 percent or less — we will continue to live in a two-speed world economy for some decades to come as a catch up process continues,” the report said.
However, even in 2050 average income per capita will still be significantly higher in the advanced economies than in the emerging economies — the current income gap is just too large to bridge fully over this period.
The projected long-term growth trends pose many opportunities and challenges for businesses in the UK and other Western economies. China, India, Brazil and the other emerging markets highlighted in PwC study will become not just low cost production locations but also increasingly large consumer markets. At a time when trend annual growth is projected to be no more than around 2 percent in the advanced economies, companies seeking growth will need to look increasingly to these emerging markets. At the same time, such markets can be challenging places to do business. It will be important to understand and adapt to local rules, regulations and customs. The right entry strategy and, where appropriate, the right joint venture partner(s) will be crucial, as will good relations with local government and regulatory bodies. In some cases, the optimal production locations may not be the same as the largest consumer markets (e.g. investing in Malaysia, Indonesia or Vietnam as a gateway to China or India, or in Poland as a gateway to Russia). The report said there are also important challenges for governments, not least regarding natural resource constraints such as those relating to energy use and climate change.