Nigeria To Emerge Top Ten Economies In 2050 – Pwc Report

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  • China will clearly be the largest economy by 2030, but its growth rate is likely to revert to the global average in the long run
  • India could challenge US for second place by 2050
  • Philippines, Vietnam and Malaysia also set to be notable risers
  • Colombia and Poland will grow more strongly to 2050 than Brazil and Russia.

Emerging economies of Nigeria, Indonesia and Mexico could push the UK and France out of the top ten economies of the world by 2050 provided they are able to build their institutions to global standards, diversify their economies and sustain growth friendly policies.

This is one of the key findings from the latest report from PwC economists on The World in 2050: Will the shift in global economic power continue? This presents long-term projections of potential GDP growth up to 2050 for 32 of the largest economies in the world, covering 84% of total global GDP.

According to the report, the current global economic power shift away from the established advanced economies in North America, Western Europe and Japan will continue over the next 35 years – despite a projected slowdown in Chinese growth after around 2020. The world economy is projected to grow at an average of just over 3% per annum from 2014-50 – doubling in size by 2037 and nearly tripling by 2050. But there’s likely to be a slowdown in global growth after 2020, as the rate of expansion in China and some other major emerging economies moderates to a more sustainable long-term rate, and as working age population growth slows in many large economies.

Nigeria, Vietnam and the Philippines are notable risers in the global GDP rankings in the long term, reflecting relatively high projected average growth rates of around 4.5-5.5% per annum over the period to 2050.

According to Andrew S. Nevin, PwC Nigeria’s Chief Economist and co-author of the report “Over the past decade, Nigeria has boasted superior economic growth and, with the right reforms and investments, Nigeria could become one of the world’s leading economies by 2030, with further progress by 2050. Nigeria’s potential advantages for future growth include a large consumer market, a strategic geographic location, and a young and highly entrepreneurial population.

However, at the same time, we are all aware of the significant headwinds created by the rapid drop in the oil price, putting pressure on the fiscal and monetary systems, as well as reducing economic growth in the short term. To achieve its long-term economic potential, Nigeria will need to manage the oil price decline effectively at all levels of government and create a sustainable platform for diversification into the sectors that we know will drive the economy in the future – including power, agriculture, manufacturing, telecoms, hospitality and real estate.

Beyond Nigeria, we project that China will be the largest economy by 2030 on any measure. However, we also expect its growth rate to slow markedly after around 2020 as its population ages, its high investment rate runs into diminishing marginal returns and it needs to rely more on innovation than copying to boost productivity. Eventual reversion to the global average has been common for past high growth economies such as Japan and South Korea and we expect China to follow suit.”

The report also contains projections based on GDP at market exchange rates, without this relative price adjustment. On that basis, China is projected to overtake the US in around 2028, while India would clearly be the third largest economy in the world in 2050, but still some way behind the US.

Other highlights from PwC’s projections are:

  • India has the potential to sustain its higher growth rate for longer and become a $10 trillion economy by around 2020 in purchasing power (PPP) terms, or around 2035 at market exchange rates. But this relies on India making sustained progress on infrastructure investment, institutional reforms and boosting education levels across the whole population.
  • Emerging economies like Indonesia, Brazil and Mexico have the potential to be larger than the UK and France by 2030, with Indonesia possibly rising as high as 4th place in the world rankings by 2050 if it can sustain growth-friendly policies.
  • Malaysia is also projected to grow at around 4% per annum on average in the period to 2050, which is higher than China’s projected average growth rate of around 3.5% per annum over this period, and an impressive performance for what is already a middle income country.
  • Colombia is also an economy that PwC projects to grow at a relatively healthy long term rate of around 4% per annum over the period to 2050, noticeably faster than its larger Southern American neighbours like Brazil and Argentina.
  • Japanese growth is projected to be the slowest of all 32 countries covered in total terms, driven in part by a steadily declining population; as a result Japan is projected to fall from 4th to 7th place in the global GDP rankings over the period to 2050.
  • European economies tend to slide down the rankings, with growth rates in the major Eurozone economies projected to average only around 1.5-2% per annum to 2050.
  • Poland is projected to have the highest average growth rate of the large EU economies, and also to outperform Russia in terms of long-run growth.

These projections assume, however, that emerging markets will follow broadly growth-friendly policies. In practice, not all may do so and therefore not all of these economies will fulfil the potential indicated by the PwC growth projections, although some could also exceed the projections if they can accelerate their investment rates and institutional reforms.

How should businesses approach emerging markets?

The PwC analysis has a number of high-level messages for businesses looking to develop their emerging market strategies, including:

  • It may be difficult to sustain the growth rates of the 2000 to 2012 period in the major emerging markets, given the combination of economic bottlenecks and institutional deficiencies. Some slowdown should be factored into business plans and investment appraisals.
  • Emerging markets vary greatly in their institutional strengths and weaknesses, which need to be carefully assessed. There could also be major differences in institutional strengths between industry sectors within countries. Deep local knowledge that is updated in real time is critical to manage businesses successfully in an emerging market environment. Having the right local partners to navigate you through local political, legal and regulatory systems is also critical. Identifying and promoting local talent who understand local business and social cultures better than any outsider will also be an increasing source of comparative advantage.
  • For large companies making strategic investments in frontier markets like sub-Saharan Africa, part of their contribution could be to try to improve the local institutional framework. This could involve offering appropriate technical assistance and advice to local governments in areas like corporate governance, fiscal policy and intellectual property rights protection. It could also involve investing in social and economic infrastructure (e.g. schools, roads, railways, power and water networks) where these are vital to a company’s longer term success in a region.
  • Finally, don’t forget mature markets in North America and Europe. These will remain very significant players in the global economy for decades to come even if their growth rates average only around 2%. PwC’s analysis shows, for example, that average income levels per person (at PPPs) in 2050 will still only be around 40% of average US levels in China and around a quarter of US levels in India. Advanced economies will also, generally speaking, still be easier and lower risk places to do business given their political and institutional strengths.

Nevin concludes:

“According to our long term projections, Nigeria could sustain average growth of around 5-6% per annum in the long run, following projected growth of around 6-7% in the rest of this decade, assuming broadly growth-friendly policies are pursued. While foreign investment has in absolute terms long been focused on the oil sector, portfolios are becoming increasingly diversified, moving towards the power, agriculture and mining areas of the economy that have demonstrated a comparative advantage in emerging markets vis-à-vis the West.

Recent experience has however underlined that relatively rapid growth is not guaranteed for emerging economies, as indicated by recent problems in Russia and Brazil, for example. It requires sustained and effective investment in infrastructure and improving political, economic, legal and social institutions. It also requires remaining open to the free flow of technology, ideas and talented people that are the key drivers of economic catch-up growth. Overdependence on natural resources could also impede long-term growth in countries such as Nigeria, Russia, and Saudi Arabia unless they can diversify their economies over time.

“In short, while our analysis confirms that emerging markets have huge potential, they can also be an institutional minefield – both managers and investors need to tread carefully. Overall, Nigeria continues to be an attractive place to invest not because it is an oil producer, but because of the immense size of its domestic market and the extraordinary commercial energy of its people, which remains largely untapped.”

Source: Naija247news

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Adeoye is a creative brand expert who has a passion for identifying and creating brands, trends, He also has over 3 years experience in Web design, graphics, Video Editing ...

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