Emerging markets will overtake G7, study finds
Fund Strategy, Mar 13
The economies of the seven largest emerging economies will be significantly larger than the current G7 industrialised nations by 2050, according to a study by PricewaterhouseCoopers*.
John Hawksworth, the head of macroeconomics at PwC, estimates that at market exchange rates the “E7” (China, India, Brazil, Russia, Indonesia, Mexico and Turkey) will be 25% larger than the G7 at market exchange rates. At present the E7 economies are only 20% of the size of the G7.
At purchasing power parity rates, which take into account lower prices in the emerging world, the E7 will be 75% larger than the G7 by 2050. At present the largest emerging countries are about 75% of the size of the large developed nations.
By 2050 China alone will be 94% of the size of the American economy at market exchange rates, while India will represent 58%. On this basis, the British economy will be smaller than many countries’, including Brazil, Indonesia and Mexico.
On a PPP basis, China will be 43% larger than America, while India will be the same size as the US. The Brazilian economy will have overtaken that of Japan.
Hawksworth argues that both systems of measuring economic size have their uses. PPP rates are better for measuring living standards or the volume of economic output. Market exchange rates are superior for measuring the size of markets for those engaged in hard currency trade or investment.
* The World in 2050: How big will the major emerging market economies get and how can the OECD compete?