Global Economic Powerhouse to Shift Soon

A recent report from Goldman Sachs has predicted that the future global economy powerhouse is about to shift dramatically and Asia could soon become the next economy powerhouse on a global scale. In the report, analysts have projected the shift based on the world’s Gross Domestic Product (GDP) and they believe Asia could surpass the traditional economic powerhouses grouped together in the Developed Markets (DM) category and emerged as the largest regional contributor to world GDP.

According to these forecasts, by the year 2050, the Asia region (excluding DM) is anticipated to contribute 40% to the worldwide GDP, slightly surpassing the projected 36% share held by DM. This signifies a significant change from the situation 50 years ago in the year 2000, when DM accounted for more than 77% of the global GDP. The provided table presents a detailed breakdown of the projected real GDP for different regions in 2050, with all values expressed in terms of 2021 USD.

Source: Goldman Sachs Global Investment Research

Here’s the visual on how the global GDP will be distributed in year 2050 according to projections from Goldman Sachs analysis:

Asia as the Next Economy Powerhouse

In 2050, Goldman Sachs projected that the world’s five largest economies will be led by China, United States, India, Indonesia and Germany. It is projected that China and India will contribute the most to the region’s GDP in 2050, although China’s economic growth will have considerably slowed down. In fact, according to Goldman Sachs, China’s real GDP is predicted to grow by an average of 1.1% per year throughout the 2050s. 

The fastest growing economies in Asia during the 2050s will be India (3.1% annually), Bangladesh (3.0% annually), and the Philippines (3.5% annually). These countries are anticipated to flourish due to their high rates of population growth and relatively young median age, which translates to a larger and energetic workforce.

Looking further ahead to the year 2075, the global economic landscape is set to witness significant changes. The three largest economies on the planet are projected to be China, India, and the United States, with India narrowly surpassing the US in terms of economic size. Notably, the potential growth of the US GDP is anticipated to outpace that of China over this period, mainly due to its more favorable demographic prospects. By implementing suitable policies and establishing effective institutions, the projections suggest that seven out of the top ten world economies in 2075 will consist of the current Emerging Markets.

The following table implies that China, US, India, Indonesia and Germany will the world’s five largest economies in 2050:

World’s largest economies (measured in USD)

Source: Goldman Sachs Global Investment Research

China is estimated to overtake US as the world’s largest economy 12 years from now, around Year 2035, while India should be catching up by 2075. The EM leader board is foreseen to be significantly changed by 2075.

World’s largest economies (measured in USD)

Source: Goldman Sachs Global Investment Research

As for Latin America, it becomes evident that the region’s contribution to the global GDP will be relatively modest, accounting for about 7% in the year 2050. Looking back at projections made by Goldman Sachs in 2011, it’s clear that several Latin American countries have not performed as well as anticipated over the past decade. For instance, Brazil’s real GDP contracted from USD2.7 trillion in 2010 to only USD1.5 trillion in 2020.

These setbacks have led Goldman Sachs to believe that Indonesia has the potential to surpass Brazil and become the largest emerging market worldwide before 2050.

Nonetheless, it’s worth noting that despite these challenges, Brazil’s economic ranking is still projected to surpass that of France and Canada by that time, assuming these forecasts turn out to be accurate.