China to overtake US as world's largest economy by 2035: Goldman Sachs

Source:China Sport ShowRelease time:22-Dec-2022Clicks:

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China is forecast to overtake the United States as the world’s largest economy by around 2035, while India is expected to have the second largest by 2075, according to Goldman Sachs Research, which recently said expansion in global economic growth is slowing as population growth weakens. But emerging economies, and powerhouses in Asia in particular, are forecast to keep catching up to richer countries.

Weakening productivity, linked to a slowdown in globalisation, is also part of the reason Goldman Sachs economists expect gross domestic product (GDP) growth to fade.

Worldwide potential growth—the rate an economy can sustain without producing too much inflation—is forecast to average 2.8 per cent annually between 2024 and 2029 and to gradually decline thereafter, Goldman Sachs Research said in a release.

That compares with an average 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.

“Global population control is a necessary condition for long-term environmental sustainability,” Goldman Sachs economists Kevin Daly and Tadas Gedminas wrote in a report. But a population that is ageing and growing more slowly will have to cope with rising healthcare and retirement costs. The number of countries that face a serious economic challenge from a greying population is likely to steadily increase in the coming decades.

Emerging economies, led by powerhouses in Asia, are growing more quickly than developed ones, even as expansion in real (inflation adjusted) global GDP slows. Their share of the world economy will continue to rise, and their incomes are expected to slowly converge toward those of richer countries.

China, India, and Indonesia slightly outperformed Goldman Sachs economists’ forecasts from 2011, while Russia, Brazil, and Latin America more significantly underperformed those projections.

“We expect that the weight of global GDP will shift (even) more towards Asia over the next 30 years,” the latest report said. In 2050, the world’s five largest economies (measured in US dollars) are projected to be China, the United States, India, Indonesia and Germany.

Looking out to 2075, the prospect of rapid population growth in the likes of Nigeria, Pakistan and Egypt imply that—with the appropriate policies and institutions—these economies could become some of the largest in the world.

The economists think protectionism and climate change are two of the biggest risks to their projections. Populist nationalists are in power in some countries, and supply-chain disruptions during COVID have resulted in a greater focus on resilience and onshoring, according to Goldman Sachs Research.

This has resulted in a slowdown rather than a reversal of globalisation, but the risks to globalisation, which reduced income inequality across countries, are there. For it to continue, there will need to be more focus on sharing the benefits of globalisation and rising incomes within each nation.