China to overtake US as world’s largest economy by 2035

Economists predict India will be in second place by 2075 as world population growth slows

Manufacturing in Nantong, China, where domestic output is predicted to be the world's strongest by 2035. Photo: AFP
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China is forecast to overtake the US as the world’s largest economy by around 2035, while India is expected to become the world’s second largest by 2075.

The two countries will be followed by the US in third place, according to a long-term outlook by Goldman Sachs.

“We expect that the weight of global GDP [gross domestic product] will shift even more towards Asia over the next 30 years,” Goldman Sachs economists Kevin Daly and Tadas Gedminas wrote in a 45-page report.

In 2050, the world’s five largest economies are projected to be China, the US, India, Indonesia and Germany.

Nigeria, Pakistan and Egypt could also be among the world’s largest economies by 2075, thanks to their rapid population growth, if they adopt “appropriate policies and institutions”, the report said.

The US, after outperforming long-term real GDP growth projections over the past decade, is unlikely to repeat this feat over the next decade, the report said.

“US potential growth remains significantly lower than that of large emerging market economies, including China and especially India,” Mr Daly and Mr Gedminas said.

“Moreover, the US dollar’s exceptional strength in recent years has resulted in it rising significantly above its purchasing power parity-based fair value, and this deviation implies that it is more likely to depreciate over the coming 10 years.”

Global economic growth, which has already dimmed over the decades, is forecast to slow down further by 2075 due to a deceleration in world population gains, according to a long-term outlook by Goldman Sachs.

The global economy is projected to grow by an average of 2.8 per cent annually between 2024 and 2029 and gradually decline thereafter, according to the Goldman Sachs Research report. That compares with an average growth of 3.6 per cent in the decade before the global financial crisis and 3.2 per cent in the 10 years before the Covid-19 pandemic.

Much of the economic slowdown is due to weaker world population growth. Over the past 50 years, the growth in the number of people on the planet declined from 2 per cent per year to less than 1 per cent currently, and UN projections show that it will drop to close to zero by 2075.

Weakening productivity, linked to a slowdown in the pace of globalisation and technological progress, will also contribute to the fading growth of global gross domestic product.

“Globalisation is not simply about goods trade — it encapsulates the growth in the cross-border movement of goods, capital, people, technologies, data and ideas,” the Goldman Sachs economists said in the report.

“With the period of rapid globalisation now behind us, it seems unlikely that the global economy will regain the rates of productivity growth achieved during the 2000-2010 decade. Moreover, the possibility of an outright reversal is a key risk to the global outlook.”

Overall, protectionism and climate change are two of the biggest risks to the long-term economic growth projections, the report showed.

“While income inequality between countries has fallen, income inequality within countries has risen. This poses a major challenge to the future of globalisation,” the economists said.

In terms of climate change, the report said “there is no practical reason” why the global economy as a whole cannot “decouple” economic growth from carbon emissions.

“But achieving sustainable growth requires economic sacrifices and a globally co-ordinated response, both of which will be politically difficult to achieve,” Mr Daly and Mr Gedminas said.

Updated: December 26, 2022, 10:26 AM