The G20 in 2050

Authors: Uri Dadush, Bennett Stancil
Originally published by the Carnegie Endowment for International Peace

The world’s economic balance of power is shifting dramatically. By 2050, the United States and Europe, long the traditional leaders of the global economy, will be joined in economic size by emerging markets in Asia and Latin America. China will become the world’s largest economy in 2032, and grow to be 20 percent larger than the United States by 2050. Over the next forty years, nearly 60 percent of G20 economic growth will come from Brazil, China, India, Russia, and Mexico alone. However, these emerging markets will not rise among the world’s richest countries in per capita terms: their average income in 2050 will still be 40 percent below that of the G7 states today. The end of the decades-old correlation between economic size and per capita income will have profound effects on global economic governance. The G20’s recent transformation into the world’s principal economic forum highlights the beginning of a more integrated and complex economic era.

Projecting to 2050

GDP projections for the G20 nations (excluding the EU) are derived from assumptions about labor force growth (drawn from U.S. Census data), rates of investment, and speed of technological change. These projections expand on previous studies, including those done by Goldman Sachs, PricewaterhouseCoopers, and the World Bank, by adjusting for initial quality of governance, education, and infrastructure, as well as updating population and investment rate projections.

Estimates through 2014 draw on the latest IMF forecasts, while subsequent projections are derived from a Cobb-Douglas production function. Projections for 2015 to 2025 are weighted by pre-crisis trends; those for 2025 to 2050 come directly from the model.1

Average Annual GDP Growth

Percent Change (y/y)

These projections assume that markets stay open, macroeconomic policies remain sound, and catastrophes do not occur. Thus, they provide only an educated assessment of broad developments in the international economy.

Power Shift

Over the next 40 years, the G20 GDP is expected to grow at an average annual rate of 3.6 percent, rising from $38.3 trillion in 2009 to $161.5 trillion in 2050, in real U.S. dollar terms. Nearly 60 percent of this $123 trillion dollar expansion will come from Brazil, Russia, India, China and Mexico (BRIC+M). These five economies will grow at an average rate of 6.1 percent per year, raising their share of G20 GDP from 18.7 percent in 2009 to 49.2 percent in 2050. By contrast, GDP in the G7 will grow by less than 2.1 percent annually, with their share of G20 GDP declining sharply from 72.3 percent ($27.7 trillion) in 2009 to 40.1 percent ($64.7 trillion) in 2050.

In purchasing power parity (PPP) terms, the shift is even more dramatic. Currently, the G7 claims 54.6 percent of G20 PPP GDP, while the BRIC+M economies account for 34.7 percent. In 2050, the BRIC+M economies will be more than twice as large as the G7 in PPP terms, claiming 60.1 percent of G20 PPP GDP, compared to the G7’s 28.6 percent. Furthermore, the BRIC+M economies will be five of the world’s six largest.

The New Triad

China, India, and the United States will emerge as the world’s three largest economies in 2050. Their total GDP, in real U.S. dollar terms, will be over 70 percent more than that of the other G20 countries combined. In China and India alone, GDP is predicted to increase by nearly $60 trillion—the current world GDP—but the wide disparity in per capita GDP among these three will persist.