Who Will Drive the Global Economy in the 21st Century?
Since the global financial crisis in 2008, exporters and investors have struggled to find markets that can offer them consistently high rates of growth. In the final decades of the 20th century, growth was driven primarily by the impressive expansion of the world’s leading developed markets in North America, West Europe and East Asia. However, since the beginning of the 21st century, growth has come primarily from emerging markets, particularly Asia’s giant emerging markets such as China and India. As we have reached the mid-point of the second decade of the 21st century, finding economies that have the right combination of scale and growth to drive global economic expansion has become a difficult task. Here, we will look at which economies will be driving growth over the near-term, medium-term and long-term to determine which economies will be the leading sources of growth in the coming years and decades.
Over the remainder of this decade, the world's leading economies will remain the key drivers of global economic growth. While China’s economy remains smaller than that of the United States, the fact that it will grow at a pace more than double that of the US (and more than four times that of the EU), means that China will account for 23.4% of global economic growth between now and the end of this decade. Meanwhile, the United States, thanks to projected growth rates of nearly 3% per year over the remainder of the decade, will continue to be a key driver of global economic growth, contributing almost 17% of the world’s total economic expansion. Meanwhile, the European Union’s contribution to global economic growth will recover slightly from its recent struggles, but it will still account for less than 10% of the world’s economic growth over the next five years.
Over the medium-term (the years 2020 to 2030), the global contribution to economic growth picture begins to change. First, China’s role as the key driver of global economic growth becomes more pronounced, with China accounting for 25% of total global economic growth between 2020 and 2030 as its economy reaches the scale of that of the US or the EU. Meanwhile, the United States’ role, while shrinking, remains vital, as it will account for nearly 14% of global economic growth over the medium-term. In contrast, the European Union’s role in driving the global economy will continue to shrink. Instead, emerging economies such as India, ASEAN and Latin America will play an ever-greater role in driving economic growth. Nevertheless, the relatively small size of these emerging economies will mean that, while they are growing rather quickly, their share of global economic growth remains each below 6% during the years 2020 to 2030.
As we look at the long-term (2030 to 2050) outlook for the global economy, we see that China’s role as the key driver of global economic growth continues to expand. Even as Chinese economic growth rates fall below 5% per year during this period, China will account for 30% of global economic growth and its economy will be 50% larger than that of the United States by the middle of this century (and more than twice as large as that of the EU). Interesting, the United States will continue to contribute far more growth than any other economy outside of China (nearly 12%) as it grows at a pace faster than most other developed economies. Meanwhile, large emerging markets such as India and Southeast Asia will now be major contributors to global economic growth, offering sizeable growth opportunities for exporters and investors. Moreover, poorer emerging regions such as Sub-Saharan Africa will by this point contribute more than 5% of the world’s overall economic growth, more than India or ASEAN contribute today.
Overall, these forecasts show that China’s role in the global economy will continue to grow at a significant pace in the years ahead as not only is its rate of growth impressive, but so too is the scale of China’s economic growth. Meanwhile, it is clear that emerging markets will offer ever-larger growth opportunities in the years ahead, even if their relatively low wealth levels mean that the scale of this growth remains somewhat small over the near-term. Finally, the United States stands out among its developed economy peers as the one wealthy economy that will continue to drive a sizeable portion of the world’s economic growth over the longer-term. Altogether, these shifts in economic power and influence will have major ramifications for the global balance of power in the coming years and decades and are a key to global development and security in the 21st century.