G7 set to be eclipsed by E7: PwC
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The financial crisis has accelerated a shift in global economic power that could see the major emerging economies overtaking the G7 within a decade, a new report by consultants PwC concludes.
If GDP is measured by purchasing power parity (PPP) to take account of national price differences, the E7 – the seven major emerging economies of China, India, Brazil, Russia, Indonesia, Mexico and Turkey - will surpass the G7 by 2020. China will by then have taken the top spot in the global economy, pushing the United States into second place, the report says.
Using market exchange rates (MER) to measure GDP, the process would take somewhat longer. On this basis, China would overtake the U.S. around 2035, and the E7 would surpass the G7 by 2040.
G7 countries that fail to adjust to the new reality face life "in the slow lane of history", PwC warns. The report singles out the U.K. as particularly vulnerable because of its excessive dependence on U.S. and European markets.
The biggest winner overall in coming decades will be India, whose share of world GDP is set to grow from 2 percent in 2009 to 13 percent in 2050. India's growth rate will overtake China's sometime in the coming decade because of its growing workforce and because its less developed starting point offers greater growth potential.
By 2050 China will rank first, and India second, among global economies, measured by PPP. Using market rates, the U.S. would hang on to second place above India.
The renewed predominance of China and India, with their huge populations, will mark a return to the historical norm after an exceptional three centuries of Western pre-eminence following the Industrial Revolution, the report says.
Other big winners over the coming decades will include Vietnam and Nigeria, according to PwC. Vietnam will have overtaken Saudi Arabia and Australia in MER terms by 2050, and topped Italy and Canada if measured by PPP. Nigeria is set to perform even better, overtaking Canada, Spain and South Korea on both measures, and replacing South Africa as the only African country among the top 20 global economies.
China's growth will slow as export industries lose their edge, due to higher wages and an aging population. But the country will gradually move up the value chain, shifting from manufacturing to service industries, and is set to become an increasingly important segment of the world market.
