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Economy

China and India to make up one-third of global GDP in 2060: JCER

Emerging giants forecast to approach US and Europe's combined economic might

The JCER predicts India will become the world's third-largest economy by 2060 as its service sector expands.   © Reuters

In a long-term economic forecast covering 65 economies, Tokyo-based think tank the Japan Center for Economic Research has found that China and India will account for 35% of global gross domestic product in 2060, nearing the U.S. and European nations' combined share.

China's share of the world's economy will be about 20% and India's nearly 16% in 40 years' time, up from 17% and 4% in 2019, respectively. The forecast sees China adding three percentage points to its share, while India's will increase fourfold thanks to a continuous tailwind from population growth.

China is expected to keep its current No. 2 position in the world GDP ranking until surpassing the U.S. around 2030. India will be the world's third-largest economy in 2060, by which time China is predicted to be back at No. 2 and the U.S. in first place again. 

As China and India rise, the combined share of the U.S. and European economies will fall from over 50% in 2019 to 38% in 2060.

European nations will see their collective share of GDP at a level slightly above India in 2060, but their proportion of global GDP will have dropped significantly. With Brexit and the intensifying political row between southern Europe and Germany, it will likely be harder for Europe to maintain its current level of international influence.

Meanwhile, Japan will become a smaller, weaker player. Its share of global GDP is predicted to fall to 3% in 2060 from 6% in 2019, a far cry from its status as the world's second-largest economy in the late 20th century. For Japan to maintain its national interests it will need to work more closely with other great powers.

With the new balance of economic power, emerging nations will gain a bigger voice in the arenas of international politics and economic frameworks through 2060.

For this long-term economic forecast, the JCER used econometric models based on multiple parameters including digitalization and intangible asset investment factors. But it relied more on population and catch-up factors for most emerging countries, for which insufficient statistics are available to represent digitalization and intangible assets.

Catch-up factors were measured to reflect income gaps between emerging countries and the U.S., following the logic that the greater the gap, the greater the capacity for an emerging nation to adopt new technologies and increase productivity.

Under this analysis, members of the Association of Southeast Asian Nations and Africa are expected to increase their share of the global economy. Both have relatively low income levels, so should benefit from larger catch-up effects. Population growth was also taken into consideration. Indonesia, the Philippines and Vietnam in ASEAN, and Nigeria and Egypt in Africa are likely to rise up the economic scale by 2060.

Indonesia is predicted to fare particularly well and climb the GDP ranking from 16th in 2019 to seventh in 2060, while Thailand, currently second in the ASEAN region, is likely to experience limited growth due to its expected population decline after the 2030s.

With Africa continuing to enjoy high population growth, Nigeria is expected to have 480 million people in 2060 -- up from 120 million in 2000 -- while Egypt's population will increase from 70 million to 180 million. As a result, the world GDP ranking in 2060 is expected to have Nigeria in 12th place and Egypt in 19th.

The forecast sees digitalization, which has already started changing the industrial landscapes of advanced countries to a large extent, also affecting emerging nations by 2060, especially in terms of percentage shares of their GDP components.

The JCER estimates the service industry's share of the U.S., U.K. and Swedish economies will reach 90%, while that of manufacturing will shrink, with its ratios falling below 10% in the U.S. and U.K.

In China, manufacturing accounts for over 30% of its economy today, but it is likely to drop to the low 20s by 2060 as the country's service sector further expands.

India's service sector is expected to reach about 80% of its economy by 2060. The country's manufacturing industry will also likely keep growing in size due to income levels remaining relatively low, but its share of Indian GDP is expected to stay flat. As India's primary industries are still significant, a shift from agriculture to services is expected to take place over the coming decades.

More details of the long-term forecast can be found on the JCER website.

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