Gold Magazine February - March 2013, Issue 23

world business GLOBAL ECONOMIC CENTRE {BUSINESS} OF GRAVITY SHIFTS THE GLOBAL FINANCIAL CRISIS HAS ACCELERATED THE SHIFT OF THE ECONOMIC CENTRE OF GRAVITY, WITH CHINA, THE US AND INDIA SET TO BE THE THREE MAJOR ECONOMIES BY 2050 BUT THE EMERGING ECONOMIES DO FACE MAJOR CHALLENGES IN THEIR BID TO SUSTAIN THEIR RECENT STRONG GROWTH. T hese are just two findings from the latest World in 2050 report published by PwC’s macroeconomics team. The original World in 2050 study in 2006 covered the 17 largest economies: the G7 (France, Germany, Italy, Japan, the UK, the US and Canada) plus Spain, Australia and South Korea; and the E7 (Brazil, Russia, India, China, Indonesia, Mexico and Turkey). The extended 2013 study, entitled World in 2050. The BRICs and Beyond: Prospects, Challenges and Opportunities, also includes Vietnam, Nigeria, South Africa, Malaysia, Poland, Saudi Arabia and Argentina. The report concludes that the emerging economies are set to grow much faster than the G7 over the next four decades. Figures for average growth in GDP in purchasing power parity (PPP) terms show Nigeria leading the way over the period from 2012 to 2050, followed by Vietnam, India, Indonesia, Malaysia, China, Saudi Arabia and South Africa. This means that, in PPP terms, the E7 could overtake the G7 before 2020 and by 2050 China, the US and India could be by far the largest economies, with a big gap to Brazil in fourth place, ahead of Japan. And by the same time, Russia, Mexico and Indonesia could be bigger than Germany or the UK, Turkey could overtake Italy and Nigeria could rise up the league table, as could Vietnam and South Africa in the longer term. Beyond the largest economies, Malaysia has considerable long-term growth potential, while Poland could continue to outpace its Western European neighbours for some decades to come. But what are the risks that could derail emerging market growth? The PwC report cites a THE EMERGING ECONOMIES ARE SET TO GROW MUCH FASTER THAN THE G7 OVER THE NEXT FOUR DECADES number of potential sources of macroeconomic and political instability, such as: • High fiscal deficits in India and Brazil • Over-reliance on oil and gas revenues in Russia and Nigeria • Rising income inequality leading to social tensions in China and other fast-growing economies • Macroeconomic and financial instability in Vietnam. The report also highlights the pressure on natural resources from rapid growth in emerging economies, including the increasing difficulty of keeping global warming to no more than 2°C. While new unconventional energy sources such as shale gas were reducing fears of running out of fossil fuels, the dangers associated with more volatile global climate patterns only seem likely to increase over the next four decades based on the projections in the report. Actual and projected top 20 economies ranked by GDP in PPP terms 2011 2030 2050 GDP AT PPP PROJECTED PPP (2011 COUNTRY GDP AT PPP RANK COUNTRY US$BN) (2011 US$BN) US 1 China 2 India 3 PPP 4 RANK Japan Germany 5 Russia 6 Brazil 7 France 8 UK 9 Italy 10 Mexico 11 Spain 12 13 South Korea 14 15 16 Canada Turkey Indonesia 17 Australia 18 Poland 19 Argentina 20 Saudi Arabia 15094 11347 4531 4381 3221 3031 2305 2303 2287 1979 1761 1512 1504 1398 1243 1131 893 China US India Japan Russia Brazil Germany Mexico UK France Indonesia Turkey 813 720 686 Australia Italy Korea Spain Canada Saudi Arabia Poland Argentina 30634 23376 13716 5842 5308 4685 4118 3662 3499 3427 2912 2760 2629 2454 2327 2148 1582 1535 1415 1407 COUNTRY China US India Brazil Japan Russia Mexico Indonesia Germany France UK Turkey Nigeria Italy Spain Canada South Korea Saudi Arabia Vietnam Argentina PROJECTED GDP AT PPP (2011 US$BN) 53856 37998 34704 8825 8065 8013 7409 6346 5822 5714 5598 5032 3964 3867 3612 3549 3545 3090 2715 2620 Source: World Bank estimates for 2011, PwC esti

Gold Magazine February - March 2013, Issue 23 | Page 91