The world economy to 2020: A tale of three countries China, US and India to drive global growth; Brazil and Russia to disappoint
Almost 40% of the increase in global GDP in the coming 15 years will come from China (27%) and India (12%). Brazil and Russia trail in their wake, each contributing just over 2% to the increase in world GDP between now and 2020.
This is one highlight of Foresight 2020, a major new research report launched today by the Economist Intelligence Unit, sponsored by Cisco Systems. The research is based on new long-term economic forecasts, a survey of more than 1,650 executives and a series of in-depth interviews with senior executives.
Other key findings from the study:
The US, which will account for 16% of the world's growth, will remain a world leader and will continue to outpace other major developed economies between now and 2020.
The US is forecast to grow by almost 3% a year, compared with 2.1% for the EU25 and less than 1% for Japan, whose population will be shrinking.
The EU will make up for slower growth through territorial expansion, growing to a club of more than 30 countries, but the average income of the expanded EU will be only 56% of the US average in 2020.
China will have closed the gap in economic size with the US by 2020 and Asia will increase its share of world GDP, measured at purchasing power parity/PPP, from 35% in 2005 to 43% in 2020.
But talk of Asia's century is premature. “On a per-capita basis, China and India will remain far poorer than Western markets and the region faces a host of downside risks,” says Laza Kekic, director of forecasting services at the Economist Intelligence Unit. “Asia will narrow the gap in wealth, power and influence, but will not close it.”
The pace of globalisation will be critical to global economic growth. Under the report's baseline scenario of further, gradual trade liberalisation, the world economy will be two-thirds bigger in 2020 than in 2005. But a partial reversal of globalisation, or, in the worst-case scenario, its unravelling, would shave up to two percentage points off annual rates of global economic growth. Conversely, faster liberalisation could add up to a percentage point to annual global growth.
Lower-cost economies will still enjoy a massive wage advantage over developed markets. In China’s case the average wage—at 5% of US and EU15 levels in 2005—will rise to about 15% of the developed-country average in 2020. Labour-intensive production processes will continue to shift to these markets, although fears of the death of Western manufacturing are premature.
(1) Increase in a country’s real GDP, at constant 2005 PPP, as a share of increase in global GDP over the same period.
Real GDP growth, selected countries, 2006-20
(annual average, %)
World 3.5
EU25 2.1
EU15 2.0
Asia 4.9
Latin America 3.2
Middle East & North Africa 4.0
Sub-Saharan Africa 2.8
United States 2.9
France 1.9
Germany 1.9
Italy 1.0
United Kingdom 2.3
Russia 3.3
Japan 0.7
China 6.0
India 5.9
Brazil 3.2
http://www.eiu.com/site_info.asp?info_name=eiu_Cisco_Foresight_2020
The world’s largest economies
GDP (US$bn, at PPP) GDP (US$bn, at market exchange rates)
2005 World rank 2020 World rank 2005 World rank 2020 World rank
United States 12,457 1 28,830 2 12,457 1 28,830 1
China 8,200 2 29,590 1 2,225 4 10,130 2
Japan 4,008 3 6,795 4 4,617 2 6,862 3
India 3,718 4 13,363 3 759 12 3,228 7
Germany 2,426 5 4,857 5 2,829 3 4,980 4
United Kingdom 1,962 6 4,189 6 2,213 5 4,203 5
France 1,905 7 3,831 7 2,132 6 3,536 6
Brazil 1,636 8 3,823 8 787 11 1,600 13
Italy 1,630 9 2,884 10 1,720 7 2,543 10
Russia 1,542 10 3,793 9 749 14 2,692 8
Spain 1,151 11 2,427 14 1,119 9 2,146 12
Canada 1,071 12 2,423 15 1,122 8 2,206 11
South Korea 1,067 13 2,837 11 804 10 2,607 9
Mexico 1,059 14 2,459 13 752 13 1,450 14
Source: Economist Intelligence Unit
