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Focus: Global Supply Chain and Logistics

Our Weekly Feature Article on Topics Related to Global Supply Chain & Logistics

From SCDigest's On-Target e-Magazine

- June 24, 2015 -

Global Supply Chain News: Major Changes in Which Countries have the Largest Economies, Coming, New Assessment Says

China to Overtake US in 2026, India, Indonesia to Rise Sharply in "New World Order"

SCDigest Editorial Staff

China will overtake the US as the world's largest economy by 2026 in terms of nominal GDP, according to a new set of predictions from the Intelligence Unit research arm of The Economist magazine (EIU).

SCDigest Says:

We will note the rise of Indonesia from out of the top 10 in 2014 to fourth place by 2050, while all the Euro countries in the top 10 fall at least two places in addition to Russia and Italy falling out.

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Some analysts believe the China already has or soon will overtake the US as the largest economy when calculated based on "purchasing power parity." That approach basically counts a loaf of bread as the same level of output between countries, even if the price for that bread is much higher in the US than in other nations.

So, it is more of a measure of the number of units of production adjusted for price differences to calculate the size of the economy, even if in terms of real purchasing power the US market is still much larger in dollar terms, as is the case currently.

But The Economist estimates China will surpass the US in a little more than a decade even when using a traditional calculation of GDP that doesn't try to adjust for purchasing power parity, and be far larger by 2050.

Years before then, India will jump six places from its current number 9 position to be the third largest economy, replacing current number 3 Japan.

In addition, Mexico and Indonesia will displace Russia and Italy among the top 10 economies by 2050.

Somewhat surprisingly, India and China will each be richer than the next five nations - Indonesia, Germany, Japan, Brazil, and the U.K. - combined, representing "a scale of wealth relative to the rest of the top ten that is unique in recorded history," according to the EIU.

As shown in the chart nearby, The Economist estimates that China's nominal GDP will be an astounding $105 trillion in 2050, versus about $71 trillion for the US and $63 trillion for India.

So that is about $239 trillion of GDP together for China, the US and India in 2050 - versus about $50 trillion for the next 5 countries combined.

Mexico and Indonesia will displace Russia and Italy among the top 10 economies over the nxt 35 year.

(Global Supply Chain Article Continued Below)

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"Who knows how accurate these estimates will turn out to be, but the implications are staggering. To be on the global stage will take success in China, the US and India - everything else will be sort of secondary in terms of revenue potential," said SCDigest editor Dan Gilmore.

The top 10 countries in terms of GDP in 2014 and the EUI estimates for 2050 are also shown in the graphic below. We will note the rise of Indonesia from out of the top 10 in 2014 to fourth place by 2050, while all the Euro countries in the top 10 fall at least two places in addition to Russia and Italy falling out.

In terms of per capita incomes, China is projected to almost catch Japan by 2050, and be just under half the U.S. level from 14% in 2014. India's spending power will surge to about 24% of the U.S. consumer spending from just 3% or so currently, the EIU said. Asia will account for 53% of global gross domestic product by 2050, with Europe's share declining, according to the EIU.

But for increases in working-age populations, look to Africa and the Middle East. Much of Europe and East Asia will record a decline in their labor force, with fast-aging Japan seeing the biggest drop of more than 25%. China and South Korea may see a 17-18% contraction in their labor forces, while Greece, Portugal and Germany are forecast to fall by more than a fifth, the EIU said.

Those drops are not good for economic health. The US, by contrast, is expected to see its working age population grow, fueled no doubt by current and future immigration.

How will these changes, notably the economic ascendancy of China and the even faster rise of India play out on the global geopolitics stage? That's the $100 trillion dollar question - but it all spells many more changes for global supply chains.

A "new world order" is coming, some say.

What do you see as the impact generally and on the supply chain of these economic changes? Let us know your thoughts at the Feedback button (email) or section (web form) below.

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