Building a new world economy, one BRIC at a time

What will the world’s economy look like in 2050?

That’s the question PriceWaterhouseCoopers (PWC) set out to answer in 2006, when it began an extensive analysis of the E7 emerging economies. These include the BRIC countries of Brazil, Russia, India and China, plus Mexico, Indonesia and Turkey.

Now, two years later, PWC has deepened its projections and come to some fascinating conclusions:

• -  Between now and 2050, these seven nations will feature the world’s largest emerging economies, with an average real growth rate of 6.4 percent.
• -  During that same time period, the G7 should experience real growth of just 2 percent.

These economic changes could lead to global cultural shifts, with Western dynamics clearly outpaced by those of Asia and Latin America. For example, the Russian, Mexican and Indonesian economies could be larger than the German, French or United Kingdom economies by 2050. During that same timeframe, the Turkish economy could grow to rival that of Italy.

Unlike most other economists, PWC went to the trouble of taking population statistics into account, adding a strong dose of reality to the report’s findings. In contrast to the popular press’ obsession with the growth of Russia and China, PWC tempered its outlook for these countries, whose populations will age quickly over the coming years. In contrast, countries such as Mexico, Brazil and India have younger citizens able to fuel continued strong growth in the decades to come.

In the interests of perspective, it’s also useful to view the report’s more basic statistics. Rather than becoming entranced by spectacular growth rates, it’s important to understand relative economic sizes in the coming 50 years. For example, Russia’s economy currently stands at approximately 8 percent of U.S. gross domestic product. By 2050, Russia’s economy should have outpaced U.S. growth to reach 17 percent of U.S. GDP. Other countries offer more startling growth:

• -  China’s current GDP is equal to 23 percent of U.S. GDP. By 2050, it should have 129 percent of U.S. GDP.
• -  India’s percentage of U.S. GDP is expected to grow from the current number of 7 percent to 88 percent in 2050.
• -  Brazil should see its GDP rise from 8 percent of the U.S. economy’s to 26 percent in 2050.

PWC cautions readers to look beyond the E7, however. Several other emerging markets with considerable growth potential should not be overlooked by investors.