World in 2050 The BRICs and Beyond: Prospects, challenges and opportunities
Global economic centre of gravity shifts, but even emerging economies face growth challenges, says PwC report
By 2050:
- China, US, India to be three largest economies by far
- Malaysia, Indonesia, Nigeria and Vietnam could climb strongly
KUALA LUMPUR, 16 January 2013 – The global financial crisis has accelerated the shift of the economic centre of gravity, with China, the US and India set to be the three major economies by 2050. But the emerging economies face major challenges in their bid to sustain their recent strong growth.
These are just two findings from the latest World in 2050 report published by PwC’s macroeconomics team.
The original PwC ‘World in 2050’ study in 2006 covered the 17 largest economies:
- The G7 (France, Germany, Italy, Japan, the UK, the US and Canada) plus Spain, Australia and South Korea, and
- The E7 (Brazil, Russia, India, China, Indonesia, Mexico and Turkey).
Malaysia is included in the extended 2013 study along with Vietnam, Nigeria, South Africa, Poland, Saudi Arabia and Argentina. This year’s report is titled World in 2050 The BRICs and Beyond: Prospects, challenges and opportunities.
The report concludes that the emerging economies are set to grow much faster than the G7 over the next four decades. Figures for average growth in GDP in purchasing power parity (PPP) terms (see note 1) show Nigeria leading the way over the period from 2012 to 2050. It is followed by Vietnam, India, Indonesia, Malaysia, China, Saudi Arabia and South Africa.
“We’re fortunate that Malaysia has recently regained its attraction as a destination for foreign direct investment, fuelled by government incentives, liberalisation policies, the Economic Transformation Programme and the Government Transformation Programme,” said Sridharan Nair, Managing Partner, PwC Malaysia.
“But we need to be agile and adaptable to stay competitive in the global market place. Having a keen understanding of market dynamics is a given. More importantly, we need the political will and participation of stakeholders like businesses, to make sure our economic transformation initiatives continue as planned,” Sri added.
Outside the G20, Malaysia, along with Vietnam and Nigeria, has strong long-term growth potential. Malaysia remains just outside the top 20 given its relatively small population compared to the other emerging economies studied (see note 2), but nonetheless has strong growth potential.
The report cites 3 key factors for this growth:
1. Malaysia is reaching out to global talent and its own large diaspora through active talent attraction programmes and a commitment to increasing the vibrancy and livability of its key urban areas.2. The expectation is that a strongly growth-friendly policy environment will continue well beyond 2020.
3. Moving up the value chain, including developing the capacity to innovate, could drive continued strong labour productivity growth.
Sri added: “Malaysia’s growth rate has the potential to outperform the study’s model results, which shows 5% average real GDP growth up to 2020. Sustainable growth will, however, only be possible through prudent management of the nation’s purse strings and responsible leadership. Having the necessary human capital and strong public private partnerships will also help us secure more investments and propel us into an innovation-driven economy.”
The PwC report cites a number of potential sources of macroeconomic and political instability, which could derail emerging market growth in other countries, 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
- Macroeconomic and financial instability in Vietnam.
The report also highlights the pressure on natural resources from rapid growth in emerging economies, including the increasing difficulty of keeping global warming to no more than 2°C.
- ENDS -
Notes:
1. There is no single right way to measure the relative size of emerging economies as compared to the established OECD economies. Depending on the purpose of the exercise, GDP at either market exchange rates or purchasing power parity rates (PPPs) may be the most appropriate measure. In general, GDP at PPPs is a better indicator of average living standards or volumes of outputs or inputs, while GDP at market exchange rates is a better measure of the size of markets for OECD exporters and investors operating in hard currencies at any given time.2. The table below illustrates the changing league positions in world GDP at PPPs – selected countries are marked in bold to highlight notable changes in rankings over time. Malaysia remains just outside the top 20 given its relatively small population compared to the other emerging economies studied.
Actual and projected top 20 economies ranked based on GDP in PPP terms
3. A copy of the World in 2050 The BRICs and Beyond: Prospects, challenges and opportunities report can be found at www.pwc.com/world2050.
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