China to become the world’s largest economy:
In 2022, the U.S. economy was still 42% larger than China’s in nominal GDP terms. Our panelists expect China to gradually reduce that gap over the next decade, before surpassing the U.S. in 2034. By 2050, China’s economy is forecast to be 20% larger than that of the U.S. But risks appear skewed to the downside for China. Economic reform momentum has waned in recent years, the population is declining and ageing, the property sector is saddled with debt, and the West is imposing ever-tougher trade and technological restrictions. Worryingly, in recent months China’s economy has consistently underperformed market expectations, seeing only a fleeting boost from the removal of Covid-19 restrictions.
The rise of India:
India will surge to become the world’s third-largest economy by 2050 according to our panelists, with nominal GDP of 38 billion— more than three times the size of Indonesia, the next biggest economy. India’s key economic strengths will be favorable demographics, ongoing business-friendly reforms and cordial relations with both the West and China. Yet the country’s still faces obstacles to its economic development. The education system is deficient relative to other emerging Asian nations. Protectionism could harm trade; in recent years, the government has declined to participate in the newly formed CPTPP and RCEP trade agreements for instance. And border disputes with Pakistan and China could intensify.
East Asia to surge:
Our Consensus is for the nominal GDPs of Indonesia, the Philippines and Vietnam to be around 10 times larger in 2050 than they are currently, thanks to the region’s relatively stable political panorama, proximity to China and India, and attractiveness as a base for global manufacturing investment. In contrast, major emerging economies in Africa, Latin America and Europe will see more modest progress. For instance, Argentina’s economy is currently one and a half times the size of those of Vietnam and the Philippines; by 2050, the two East Asian nations will each boast economic output over twice that of Argentina.
Insights From Our Analyst Network
On China’s recent economic slowdown, Nomura analysts said:
“In view of the worsening downward spiral of major activity data and Beijing’s tepid response to date, we lower our GDP growth and inflation forecasts. We expect Beijing to introduce a raft of supportive measures […] and believe it will increasingly play the role of borrower and spender of last resort. However, these measures may not turn things around, due to weak confidence, negative sentiment, the huge fiscal cliff due to the collapse of land sales, clogged transmission channels, a shrinking tool box, slow decision-making on economic matters and conflicts among multiple targets.”
On India, EIU analysts said:
“India’s growth will be the fastest among major world economies in 2023-27. Although services will make up the bulk of GDP, the implementation of labour and logistics reforms will gradually improve manufacturing competitiveness.”