world economy by 2030

The global economy will be adversely affected by the COVID-19 pandemic with short-term global growth projections revised downward. When we do return to normal growth, the impact of the pandemic will have far-reaching effects on the way we do business

Important Powers Post COVID-19                               

Who are the major economies of the world now? PWC listed some nations as top economies in 2016 on the basis of GDP at PPP. The 2016 ranking also holds valid now, in 2020. In order of ranking from above (1,2,3 etc.), the top ten economies of the world today are China, U.S., India, Japan, Germany, Russia, Brazil, Indonesia, U.K. and France. Among these according to PWC, five nations belong to advance G – 7 economies (U.S., Japan, Germany, U.K and France); while the remaining five (China, India, Russia, Brazil, Indonesia) to Emerging Markets (E – 7). Therefore, currently, five G – 7 nations and five E – 7 nations belong to the top ten categories on the basis of GDP at PPP.

In order to know the impact of COVID-19 on Global and national economy, we need to refer to a third Report, released recently by the IMF (International Monetary Fund). This report titled “World Economic Outlook, April 2020: The Great Lockdown” observed, “As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis”. But Interestingly, the IMF Report claimed that Advanced Economies like the U.S., Euro area, Japan, U.K., Canada and other countries will be hit hard due to the pandemic than Developing Economies like China, India and some ASEAN (Association of South East Asian Nations) countries.

According to the PWC Report, in the year 2030 six E – 7 countries and four G – 7 nations will be in this category. In 2030, the top ten economies will be China, India, U.S., Indonesia, Brazil, Russia, Mexico, Japan, Germany, U.K, in that order. Therefore, among the top five, E – 7 countries will dominate with four in this group. This indicates a major shift in the economic powers of the globe in 2030. But as mentioned earlier, this projection was prepared before the outbreak of COVID-19. Will COVID-19 impact this ranking? Well, not much.    

Among the current top ten economies, only China and India will have a positive real GDP growth rate in 2020 (1.2 and 1.9 percent respectively). All other countries in the top ten, real GDP growth rates will be negative in terms of percent (Source: IMF Report). In 2021, due to several corrective measures, all countries in the top ten will have positive real GDP growth rates, while China and India and some ASEAN countries are projected to grow substantially at 9.2 percent, 7.4 percent and 7.8 percent respectively (IMF Report). Advanced Economies will grow at an average rate of 4.5 percent (Real GDP) in 2021.

Therefore, according to the IMF Report, the global and national economy will revert back to the path of growth from 2021. IMF claimed in this Report that its predictions turned out to be correct during the 2008 – 09 economic crises and immediately thereafter. This time also, believes the IMF, it would be correct. Therefore, as pointed out earlier, the impact of COVID-19 over the global and national economy will be heavy in the year 2020, but due to correctional measures from 2021, the global and national economy will be somehow stable, if IMF Report turns out to be true.

As a consequence, the top ten economies in the world now (2020) will continue to be in their positions during this decade (2020 – 2030). But who among these nations will be top global powers till 2030, in terms of their political, military and economic influences? Well, two countries U.S. and China will continue to remain as number 1 and number 2 ‘Top Powers’ respectively till 2030, not only for their economic prosperity but due to their strong military (GFP Report), territorial size, industrial and technological progress and strong presence in all global forums like the UNO, WTO, NSG, IAEA, G – 20 et.al. Although the European powers have lost their preeminence in global politics and economy after World War II, a few European powers like Britain, France, Russia and the European Union (EU) [as a successful economic bloc] will enjoy ‘Major Powers’ status till 2030 due to their sufficiently strong industrial bases, military powers (GFP Report) and influence in global politics. Currently, Britain, France and Russia are permanent members of the UN Security Council and substantial military powers (GFP Report). Japan is also included in this category for its industrial and technological strength and military capability. During this decade (2020 – 2030) India, Germany, Brazil and Indonesia may be in the ‘Potential Major Powers’ category. These are either strong or strong emerging economies with big territories and potent military capabilities. In countries like Brazil, India and Indonesia social institutions and infrastructures require to be strengthened; and manufacturing sectors need to be augmented. In this context, the ‘Make in India’ policy of the present government in India is a good initiative. Despite some deficiencies, these nations are surely in the reckoning, if one takes into account all positive aspects presented in the PWC, GFP and IMF Reports. Therefore, during 2020 – 2030, important global powers may be ranked this way: Top Powers – U.S., China; Major Powers – Britain, Japan, France, Russia and the EU; Potential Major Powers – Germany, India, Brazil and Indonesia.

Key findings

This report sets out our latest long-term global growth projections to 2030 for 32of the largest economies in the world, according for around 74%of world GDP

China could become the world’s largest economy by next year, according to a projected ranking by one bank. Standard Chartered says that, by 2030, India will be No. 2, ahead of the U.S. (now No. 1), based on purchasing power parity exchange rates and nominal GDP.

A new world economic order is in the making, with today’s emerging markets, including India, at the heart of it.

India is likely to become the world’s second-largest economy by 2030, next only to China and overtaking the US, according to Standard Chartered’s long-term forecast released on Jan. 08. The UK-based multinational bank also predicts that based on nominal GDP using purchasing power parity exchange rates, China will overtake the US by 2020.

Indonesia and Turkey will round out the top five economies in 2030, and Germany, the only European nation in the top 10, will place last.

Current emerging markets will likely make up the majority of the 10 biggest economies by 2030.

Standard Chartered has raised growth forecasts for China and India from its projections in 2013. “India will likely be the main mover, with its trend growth accelerating to 7.8% by the 2020s partly due to ongoing reforms, including the introduction of a national goods and services tax (GST) and the Indian Bankruptcy Code (IBC),” says the report.

Launched in 2017, the GST attempts to simplify India’s cumbersome tax regime, while the IBC, rolled out in 2016, consolidates the country’s bankruptcy and insolvency laws.

The world economy could more than double in size by 2050, far outstripping population growth, due to continued technology-driven productivity improvements.Emerging markets (E7) could grow around twice as fast as advanced economies (G7) on average

As a result, six of the seven largest economies in the world are projected to be emerging economies in 2050 led by China (1st), India (2nd) and Indonesia (4th).

The US could be down to third place in the global GDP rankings while the EU27’s share of world GDP could fall below 10% by 2050

The bank expects “the rising aspirations of a young population to continue to support consumerism in India’s economy.”

But a young demographic also creates a demand for massive employment. About 100 million new jobs must be created in the manufacturing and service sectors by 2030, according to the report. To achieve this, it says, the government needs to close a widening skills gap, raise the participation of women in the workforce, and ease labour laws.

“India needs to train circa 10 million people annually, but currently has the capacity to train just 4.5 million,” the report says.

Ageing populations are likely to weigh on global growth, but India, home to the world’s largest group of young people, will remain unfazed, Standard Charted notes. Half of the country’s population is under the age of 25.

UK could be down to 10th place by 2030, France out of the top 10 and Italy out of the top 20 as they are overtaken by faster growing emerging economies like Mexico, Turkey and Vietnam respectively

But emerging economies need to enhance their institutions and their infrastructure significantly if they are to realise their long-term growth potential.

“Our long-term growth forecasts are underpinned by one key principle: Countries’ share of world GDP should eventually converge with their share of the world’s population, driven by the convergence of per-capita GDP between advanced and emerging economies,” the report adds.

It also calls for reforms to boost spending on infrastructure and reduce growing economic inequality in the country.

Power Equations till 2030                           

However, there will be a few changes in global power calculations from 2030 to 2050. Countries with strong NP credentials will remain in the list, but there will be a few surprises. By all indications, France may not be in the list of ‘Major Powers’ by 2050.

These Middle Powers will be South Africa, Mexico, Nigeria, Vietnam, South Korea and Turkey. Therefore, many Middle Powers will be from the developing regions of Africa, Asia and Latin America. This phenomenon marks an important shift in global power calculations in the future.

Its place may be taken over by India. Both Japan and Germany will have capabilities to be in the ‘Major Powers’ list; but going by indications as provided by Reports cited earlier, Japan will have an edge over Germany. Hence, the scenario in 2050 will look like this: Top Powers –  China, U.S.; Major Powers – Britain, Japan, Russia, India and the EU; Potential Major Powers – Germany, Brazil and Indonesia. In 2050, there will be many ‘Middle Powers’ vying for places in upper categories. On the basis of overall performances (economy, military, Industrial & technological development, political stability etc.),

As observed, China and the U.S. will continue to dominate as two top powers in the world till 2050. Will there be a new Cold War between these two nations? In my view, this possibility is unlikely. During the four and half decades-long Cold War between the U.S. and Soviet Union, there was negligible trade and investment engagements between the two nations. On the contrary, the U.S. and China are strong trading partners, with substantial investment by both in the other nation.  

By 2030 economies like Indonesia, Brazil, and Mexico are likely to be bigger than those of the United Kingdom and France, while Egypt and Pakistan could overtake Italy and Canada. With regards to growth, Vietnam, India, and Bangladesh may be the most rapidly growing economies from 2015-2050, averaging an increase of around 5% annually.

Nigeria has the potential to be the fastest growing major African economy, and could potentially increase its national gross domestic product ranking from place to fourteenth by 2050. However, Nigeria will only realize this possibility if it can diversify its economy away from oil and strengthen its democratic institutions and national infrastructure.

Poland and Colombia exhibit great potential and are projected to be the quickest growing large economies in their respective regions; Latin America and the E.U. Many emerging economies will be supported by a relatively rapidly growing populations, boosting domestic demand and the size of the workforce.

Investments in education and improved economic freedoms are necessary to ensure there are enough jobs for the growing number of young individuals in these countries, providing a path of sustainable growth for countries with emerging markets and developing economies. 

Today’s advanced economies will continue to have higher average incomes, but developing countries will likely make progress towards eliminating that gap. With the possible exception of Italy, each of the G7 will rank above the E7 states in 2030, based on rankings of projected gross domestic product per capita.

Note: According to my prescription view, I publish this article for my reference.