China will overtake the US to become the world's biggest economy in 2028, five years earlier than previously anticipated, as it recovers faster from the coronavirus pandemic, according to the Centre for Economics and Business Research.
“For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China,” the London-based think tank CEBR said in an annual report published on Saturday. “The Covid-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China’s favour.”
China was the first country to report the coronavirus in December last year. However, strict movement restrictions introduced by Beijing helped contain the outbreak in the country and the subsequent easing of lockdown measures accelerated its economic recovery. As of Saturday, the number of infections in China reached 86,933 with 4,634 deaths, according to Worldometer. Total recoveries stand at 81,971.
“Thanks to a strict early response, China has managed to avoid re-introducing the harshest pandemic-fighting measures after the first wave and, unlike most other advanced economies, has avoided a recession in 2020,” the report said.
China is expected to grow an average of 5.7 per cent a year from 2021 to 2025 before slowing to 4.5 per cent a year from 2026 to 2030, according to the report. The International Monetary Fund sees China's economy expanding 8.2 per cent in 2021 after slowing to about 1.9 per cent this year.
The US economy will grow 1.9 per cent a year between 2022 and 2024 and then to 1.6 per cent after that, according to CEBR. It will have a strong post-pandemic rebound in 2021. The IMF forecasts the US economy will expand 3.1 per cent in 2021 following a 4.3 contraction this year.
The US has the highest number of infections globally at more than 19.2 million, while deaths total more than 338,000 and recoveries stand at 11.2 million.
Japan will remain the world’s third-largest economy throughout the 2020s, before being overtaken by India at the start of the 2030s, according to CEBR. The country’s economy will grow at 3 per cent in 2021 and 1.6 per cent in 2022. Growth is expected to settle at 0.5 per cent a year from 2025 onwards.
The UK, currently the fifth-biggest economy by the CEBR’s measure, will slip to sixth place in 2024. The country’s economy is expected to grow 4 per cent a year from 2021 to 2025 and 1.8 per cent from 2026 to 2030.
The Brexit deal between the UK and the European Union “should be not be seen as an end in itself but as a beginning of a drive to test new policies that could work to the benefit of both sides in promoting prosperity while ensuring that the gains from prosperity are fairly shared out," the CEBR said.
Growth in Germany, Europe’s largest and the world’s fourth-biggest economy, is expected to contract 6 per cent in 2020, before rising 4.2 per cent in 2021. France’s economy, the euro area's second-largest, will grow 6 per cent in 2021 and 1.7 per cent annually from 2025 onwards.
Italy’s economy is expected to contract by 10.6 per cent in 2020 with growth picking up to 5.2 per cent in 2021. Italy was the first Western country to be hit by the coronavirus outbreak in March and introduced stimulus measures worth over €100 billion ($121.6bn) to support the economy.
Spain, which has the ninth highest number of coronavirus infections is not expected to return to pre-pandemic levels of output until 2024, according to the report.
Saudi Arabia, the Arab world’s largest economy, is expected to grow at an average rate of 2.9 per cent from 2021 to 2025 and 2.3 per cent from 2026 to 2035, while the UAE’s economy will grow 2.3 per cent a year over the next 15 years.
"Over the past four years, the United Arab Emirates has become more competitive in terms of its regulatory environment", CEBR said. Over the next 15 years, CEBR forecasts the UAE will see a modest improvement in its ranking in the World Economic League Table, rising to 32nd place in 2035 from 35th place in 2020.
Egypt, the Arab world’s third-largest economy will grow 4.8 per cent a year between 2021 and 2025.
The report also said the Covid-19’s impact on the global economy was likely to show up in higher inflation, not slower growth.