Today’s global economy is perhaps more fluid than it has ever been. Economists predict that things will change dramatically over the next decade as many long-time superpowers give way to emerging markets with fresh ideas and growing businesses. Many countries stand on the sidelines, poised to enter quickly when the moment is right.
How will the current five largest economies fare in the near future? Let’s take a look.
China’s is a long-standing economic powerhouse, and although the country faces many problems, its standing isn’t expected to change any time soon. Its growing economy led the country to pass the United States in purchasing power parity gross domestic product (PPP GDP), which measures a country’s relative purchasing power. Its total GDP is expected to grow significantly over the next 15 years. However, much of China’s population still lives in poverty, which means it doesn’t have a chance to overtake the U.S. in GDP per capita, which measures a country’s wealth against its size.
Over the next few decades, China could start to stagnant economically while its population continues to grow and age quickly. China’s largest economic obstacles remain a much-needed banking reform away from nonperforming loans and a shift towards a consumer-driven society; both changes can take lots of time and resources. However, China is still expected to be a major player in the global economic scene as it pivots to a new economic strategy and outlook and shouldn’t fall out of the top five economies any time soon.
The U.S. is still considered the world’s largest economy based on a number of factors, including the current dollar GDP. Experts predict that the U.S.’s economic independence will help it continue to be a dominant force in the global economy. By shifting a large portion of its economy from manufacturing to services, the U.S. is less reliant on exports and has become more disconnected to volatile global energy markets.
The American economy is also the most advanced in the world, though it has been consolidating and aging recently. The share of GDP generated by the 100 largest companies in the country increased from 33% in 1994 to 46% in 2013 as more companies consolidate and start-ups have a more difficult time getting started. Public companies are having much greater success than they had just a few decades ago, and the demographics of the workplace are changing, leading to more innovation and growth.
In a distant third place stands India, whose economy is nearly half of the U.S. or China, according to PPP GDP. However, India is a relatively young country with lots of potential, including the ability to create fiscal policies that encourage growth, something not many countries can still do.
India is growing rapidly, an economic tailwind, but it still needs to build infrastructure to operate as a modern economy; doing so should help its manufacturing industries and further add to its economic rise. India ranks very low (130 out of 189 countries) in the ease of doing business in the country, according to the World Bank Group. However, most experts agree that the changes needed to increase the ranking and business ease are relatively easy to put into action and could lead to accelerated economic growth. By 2030, India will have the world’s largest (and potentially youngest) workforce. By all accounts, India has almost everything in place for its economy to soar in the next few decades.
The forth and fifth spots of the top economic countries are those in the most danger. Japan’s economy has been teetering for decades following its asset bubble burst in the early 1990s and recently stagnated, with multiple attempts to revive it falling flat. With an aging population, high national debt, and a decreasing monetary policy, things look rather bleak for Japan.
As a whole, economies of countries across the European Union are decreasing and representing a much smaller percentage of the worldwide GDP than they did just a decade ago. The EU is already changing with the U.K.’s exit, and it could face even more upheaval and change over the upcoming years. Germany is expected to remain a dominant force within the EU’s economy, but the question remains just how powerful a role the EU as a whole will play on the global stage. An aging population and increasing unemployment isn’t helping Germany, who faces an uphill battle to maintain its economic position.>Who’s Next?
Possible contenders to overtake Japan and Germany as a top economic power include Russia, Brazil, Indonesia, and possibly Mexico. Experts predict that emerging markets will have the largest roles to play—although income per capita will remain the highest in developing countries, it will grow at a much higher rate in emerging countries. Russia’s lack of diversification could cause its economic growth to stagnant; however, both Russia and Brazil are leading exporters of natural resources and energy, which could lift them higher in the economic rankings.