The South African economy is expected to be ranked seventh globally in terms of its real average annual growth rate between 2009 and 2050, growing faster than Brazil and Russia in dollar terms.
However, it is likely to fall out of the top 20 economies by 2050, as Nigeria and Vietnam move up the rankings, according to a study by global business services company PricewaterhouseCoopers released on Friday.
The report, The World in 2050, concluded that the financial crisis of 2008 had accelerated the shift in global economic power to emerging economies, with China likely to overtake the US as the biggest economy by 2050.
The study projected SA’s real economic growth rate to average 5% annually between 2009 and 2050, its population to rise by an annual average of 0,3%, its gross domestic product (GDP) per capita by an average 3,6% a year and for it to experience an average annual growth rate of 1,1% due to changes in exchange rates.
The estimates were made in dollar terms — taking into account the effect of real exchange rate changes relative to the dollar — and in terms of domestic currency and purchasing power parity.
SA’s projected growth rate compared with Vietnam’s 8,8%, India’s 8,1% , Nigeria’s 7,9% , China’s 5,9% , Indonesia’s 5,8% , Turkey’s 5,1% , Brazil’s 4,4% , Russia’s 4% , Australia’s 2,4% , and less than 3% for the Group of Seven.
The E-7 emerging economies (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) are likely to overtake the G-7 (the US, Japan, Germany, UK, France, Italy and Canada) before 2020 if GDP is measured using purchasing power parity , which corrects for price levels tend ing to be lower in emerging economies.
The shift in the global economic order would be slower but just as inexorable if GDP were measured on market exchange rates. The E-7 economies were projected to overtake the G-7 in 2032 and China to overtake the US in the same year, although on a purchasing power parity basis this would probably occur in 2018.
By 2050 the E-7 economies would be about 64% larger than the current G-7 when measured in dollar terms at market exchange rates — now they represent about 36% of the G-7 — or about twice as large in purchasing power parity terms (currently 72% on this basis). China, despite its projected market growth slowdown, was expected to be 35% larger than the US by 2050 at market exchange rates, or 57% larger in purchasing power parity terms.
"The key drivers of the E-7’s growth are China and India, although the former’s growth will slow down progressively due to its significantly lower labour force growth arising from its one-child policy. India’s growth will remain fairly strong even in the last decade of our projections."
Summing up the shifts in global economic power, the report said "this changing world order poses both challenges and opportunities for businesses in the current advanced economies".
"On the one hand, competition from emerging market multinationals will increase steadily over time and the latter will move up the value chain in manufacturing and some services (including financial services, given the weakness of the western banking system after the crisis).
"At the same time, rapid growth in consumer markets in the major emerging economies associated with a fast-growing middle class will provide great new opportunities for western companies that can establish themselves in these markets.
"These will be highly competitive, so this is not an easy option — it requires long-term investment — but without it western companies will increasingly be playing in the slow lane of history ".
Source: Business Day
