• China has already surpassed the US to become the largest economy based on GDP in PPP terms
• Vietnam could be the world's fastest growing large economy during the period to 2050, rising to 20th in the global GDP rankings by that date, and outpacing Thailand
Thailand is projected to become the world's 25th largest economy in 2050, being one of the emerging economies that will overtake some established advanced economies, but it will fall behind neighbouring Vietnam and the Philippines, a PwC report says.
Thailand could fall from its 20th place in 2016 to 22nd in 2030 and to 25th in 2050, when its gross domestic product measured at purchasing power parities (PPPs) is expected to be $2,782 billion.
This is one of the key findings from the latest report from PwC economists on the theme of the World in 2050: The long view: how will the global economic order change by 2050?
It presents projections of potential GDP growth up to 2050 for 32 of the largest economies in the world, which together account for around 85% of global GDP. These projections are based on the latest update from a detailed long-term global growth model first developed by PwC in 2006.
Sira Intarakumthornchai, CEO for PwC Thailand, said that Thailand is facing a declining working age population which is seen as a drag on growth compared to neighbouring countries.
Between 2016 and 2050, Thailand's population growth will see an average contraction of 0.3%. Other South East Asian countries including Vietnam, the Philippines, Malaysia and Indonesia will have an average population growth range of between 0.5% and 1.1%, the report shows.
"The impact of a declining, ageing population could significantly harm Thailand's ability to increase its share of world GDP in a similar way to other countries such as South Korea, Russia and even Japan," Sira said.
"By 2050, Thailand's global GDP ranking in PPP terms will be 25th, falling from 20th in 2016, whereas the Philippines will rise from 28th to 19th by 2050 and Vietnam will rank 20th in 2050, rising from 32nd last year."
New emerging markets to take centre stage
Vietnam, India and Bangladesh could be the top three fastest growing economies over the period to 2050, averaging growth of around 5% per year.
However, other emerging countries like Indonesia (3.7%), Mexico (3.3%) and Thailand (2.6%) are projected to grow faster than Japan (0.9%), Germany (1.3%), the UK (1.9%) and France (1.6%), the report showed.
Recent geopolitical developments, including the Brexit vote and the U.S. presidential election, are likely to bring policy and economic changes, Sira said.
For these emerging economies to realise their growth potential, they need to reform education and invest in infrastructure and technology.
"The development of an emerging market will create a lot more business opportunities for that country as it makes it a more attractive place to invest and live in. However, these markets are also likely to be volatile so to succeed, companies that are looking for growth in these countries must be agile and tolerant," he said.
Global economy could double in size by 2042
The long-term global economic power shift away from the established advanced economies would continue over the period to 2050, as emerging market countries keep boosting their share of world GDP in the long run, despite recent mixed performances in some of these economies.
John Hawksworth, PwC's Chief Economist and co-author of the report, said growth in many emerging economies will be buoyed by relatively fast-growing populations, rising domestic demand and the size of the workforce.
"We will continue to see a shift in global economic power away from established advanced economies towards emerging economies in Asia and elsewhere. The E7 could comprise almost 50% of the world GDP by 2050, while the G7's share will decline to only just over 20%."
The report also projects that the world economy could double in size by 2042, growing at an annual average real rate of around 2.6% between 2016 and 2050.
This growth will be caused largely by emerging markets and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of around 3.5% over the next 34 years, compared to only around 1.6% for the advanced G7 nations of Canada, France, Germany, Italy, Japan, the UK and the US.
Table 1 below sets out how PwC projects global GDP rankings at Purchasing Power Parities (see Note 1) will evolve.
Table 1: Projected global GDP rankings in PPP terms (US$bn at constant 2016 values)
GDP PPP rankings 2016 rankings 2030 rankings 2050 rankings
Country GDP at PPP Country Projected GDP at PPP Country Projected GDP at PPP
1 China 21269 China 38008 China 58499
2 United States 18562 United States 23475 India 44128
3 India 8721 India 19511 United States 34102
4 Japan 4932 Japan 5606 Indonesia 10502
5 Germany 3979 Indonesia 5424 Brazil 7540
6 Russia 3745 Russia 4736 Russia 7131
7 Brazil 3135 Germany 4707 Mexico 6863
8 Indonesia 3028 Brazil 4439 Japan 6779
9 United Kingdom 2788 Mexico 3661 Germany 6138
10 France 2737 United Kingdom 3638 United Kingdom 5369
11 Mexico 2307 France 3377 Turkey 5184
12 Italy 2221 Turkey 2996 France 4705
13 South Korea 1929 Saudi Arabia 2755 Saudi Arabia 4694
14 Turkey 1906 South Korea 2651 Nigeria 4348
15 Saudi Arabia 1731 Italy 2541 Egypt 4333
16 Spain 1690 Iran 2354 Pakistan 4236
17 Canada 1674 Spain 2159 Iran 3900
18 Iran 1459 Canada 2141 South Korea 3539
19 Australia 1189 Egypt 2049 Philippines 3334
20 Thailand 1161 Pakistan 1868 Vietnam 3176
21 Egypt 1105 Nigeria 1794 Italy 3115
22 Nigeria 1089 Thailand 1732 Canada 3100
23 Poland 1052 Australia 1663 Bangladesh 3064
24 Pakistan 988 Philippines 1615 Malaysia 2815
25 Argentina 879 Malaysia 1506 Thailand 2782
26 Netherlands 866 Poland 1505 Spain 2732
27 Malaysia 864 Argentina 1342 South Africa 2570
28 Philippines 802 Bangladesh 1324 Australia 2564
29 South Africa 736 Vietnam 1303 Argentina 2365
30 Colombia 690 South Africa 1148 Poland 2103
31 Bangladesh 628 Colombia 1111 Colombia 2074
32 Vietnam 595 Netherlands 1080 Netherlands 1496
Sources: IMF for 2016 estimates (with an update for Turkey), PwC projections for 2030 and 2050
Advanced economies still have higher average incomes
With the exception of Italy, today's advanced economies will continue to have higher average incomes. The US will sit as the highest of the G7 countries in the average income rankings in 2050.
Emerging markets led by China and India are projected to close the income gap gradually over time, but full convergence of income levels across the world is not likely to take place until well beyond 2050.
"Average income gaps between countries will reduce over time, but this process will still be far from complete by 2050. In 2016, US GDP per capita was almost four times that of China's and almost nine times that of India's. By 2050, these gaps are projected to narrow so that average US income levels may be around double China's and around three times India's – but it's also possible that income inequality within countries will continue to rise, caused in particular by technological change that favours higher skilled workers and the owners of capital," Hawsworth said.