(SHARECAST) – The E7 group of emerging counties – China, India, Brazil, Russia, Indonesia, Mexico and Turkey – is likely to overtake the current G7 by 2020 in terms of economic dominance, according to professional services firm PricewaterhouseCoopers (PwC).
New data shows that the UK will likely lag behind growth from Asia and Latin America as the impact of the recession and the financial crisis around the world is expected to further accelerate the shift in global economic power to the emerging economies, the reports claims.
PwC’s projections show that the UK’s share of world GDP will decline over the next 40 years, from more than three percent to less than two percent. Currently, the UK has only a small share of exports going towards the emerging markets and heavily relies on trade to the US and EU.
“If increased trade and investment between the UK and the E7 economies can be achieved, the UK economy and consumers can benefit from the high growth of the emerging economies and might do somewhat better than our projections suggest, although the UK will still not be able to grow as quickly as the emerging economies themselves,” PwC chief economist John Hawksworth said.
The UK currently ranks seventh in terms of GDP at PPPs rankings, and is predicted to slip down to 10th by 2050, being overtaken by Brazil as early as 2013.
PwC also revealed that China will have overtaken the US by 2018. The US is currently ranked at the top of the GDP list with $14.3tn (£9.2tn) measured at constant 2009 dollar levels. China, ranked second with $8.9tn, will have grown to an estimated $59.5tn.
However, it is India rather than China that is expected to see the most significant increase in its share of world GDP, from two percent measured in 2009 surging to 13 percent by 2050.
Over the years from 2009-50, the nation is estimated to have an average annual GDP growth of 8.1 percent, overtaking the US in GDP at PPP by 2045.
“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,” Hawksworth says.
PwC estimates the E7 will be about twice as large as the G7 by 2050, reflecting the competitive challenges that UK and European companies could face. These companies “could see their market share progressively eroded by emerging economy rivals”, he adds.
Finally, Hawksworth notes that the rapid growth of emerging markets will put pressure on natural resources such as energy and water, as well as implications for climate change.
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“Commodity prices will tend to remain high, so boosting exporters of these products (for example, Brazil, Russia, Indonesia and the Middle East) and increasing input costs for natural resource importers.”
The G7 is made up of the US, Japan, Germany, UK, France, Italy and Canada.