China's economy is expected to overtake the United States in 2026 in nominal GDP (gross domestic product) based on the US dollar, and maintain its position as the largest economy to 2050. India is expected to move up the rankings to third place, with real growth averaging close to 5% up to 2050, according to the latest long-term forecasts of The Economist Intelligence Unit. However, income per capita in advanced countries will remain significant and the Chinese consumer is forecast to have almost half the income of its US counterpart by 2050.
Indonesia and Mexico are expected to leap into the top ten world economies from 16th and 15th place in 2014 to fourth and ninth place respectively by 2050. The EIU does not expect the representation of Western economies within the top-ten listing to become insignificant. The United States, Germany, the United Kingdom and France will all move down the rankings, but only Italy will lose its place within the top ten.
In 2014, the International Monetary Fund (IMF) using a purchasing power parity (PPP) conversion factor — which eliminates the effects of price differences and changes in relative price levels, particularly non-tradables, and therefore provides a better overall measure of the real value of output produced by an economy compared to other economies — estimated the size of the US economy was $17.4tn and the size of China’s economy was $17.6tn — the GDP is an estimate and the PPP is influenced by exchange rates coupled with producing a basket of goods and services representative of consumption in two countries as different as the US and China.
Last April the World Bank published a PPP-adjusted ranking for 2013 with the US, followed by China, India, Japan, Russian Federation and Germany. Ireland is at 59th rank.
In 1872, the US overtook the UK to become the world's biggest economy — according to the then data, which may not have been reliable. However, give or take some years, it did happen.
In a new report, ‘Long-term macroeconomic forecasts: Key Trends to 2050,’(free access after registration) which extends the EIU’s economic forecast for 82 countries up to 2050, emerging markets are expected to grow faster than developed economies, and as a result countries such as China and India are likely to overtake current global leaders such as Japan and Western Europe.
The report states that:
- China is expected to narrowly edge ahead of the US for the first time in the 2026 with a nominal GDP of US$28.6tn versus the US's US$28.3tn. By 2050, China will boast a GDP of US$105.9tn, compared with the US's US$70.9tn:
- Indonesia and Mexico will rank among the top ten economies at market exchange rates by 2050, overtaking economies such as Italy and Russia;
- Asia will continue its rise and by 2050 will represent 53% of global GDP, compared with from 32% in 2014.
Yet in terms of individual spending power, the EIU says today’s advanced economies are likely to continue to dominate. Emerging economies such as China, India and Indonesia are projected to see levels of consumer spending to rise significantly by 2050, but at best will represent 50% of the individual spending power of an American consumer. Despite their low growth outlook, advanced economies cannot be ignored, as the spending power of consumers in these regions will remain significantly higher.
The EIU says that in terms of income per capita, China is expected to almost catch up with Japan by 2050, and India will see its spending power rise from representing 3% of the spending power of a US consumer to 24% by 2050. The comparable spending power of a Chinese consumer compared with that of a US consumer will increase from 14% in 2014 to just under 50% — a significant catch-up.
Patricia Morton, lead economist at The Economist Intelligence Unit said: “Given China’s and India’s economic might, they will take on a much bigger role in addressing global issues such as climate change, international security and global economic governance. In the medium term, this will require the world’s existing powers — notably the US — to let India, and especially China, play a greater role on the world stage and adapt international institutions to allow them to exert greater influence. ”