Forget the threat of a global recession in 2023, the team at Goldman Sachs is already thinking about global economic growth potential through the year 2075.
"It is almost twenty years since we first set out long-term growth projections for the BRICs [Brazil, Russia, India, China, South Africa] economies and a little over ten years since we updated and expanded those projections to cover 70 emerging (EM) and developed (DM) economies," Goldman's macroeconomic team explained in a lengthy 45-page research paper. "Eleven years on, we are updating, expanding and extending our long-term projections, incorporating new data and new methods. Our revised projections now cover 104 countries, and we have extended our projection horizon from 2050 to 2075."
Here's a quick look at Goldman's economic thinking for the next 53 years.
Theme #1: Weaker population growth = slower global economic growth.
With younger households having fewer children and slowing population growth, Goldman thinks that demographics will put pressure on economic output.
"Our projections imply that global growth will average a little under 3% per year over the next ten years and will be on a gradually declining path, primarily reflecting slower labour force growth," Goldman's chief economist Jan Hatzius said. "Global population growth has halved over the past 50 years, from 2% per year to less than 1%, and is expected to fall to close to zero by 2075."
Theme #2: Some emerging markets become less emerging.
Keep an eye on today's emerging markets as they could potentially become the next economic powerhouses, Goldman points out.
"Although real GDP growth has slowed in both developed and emerging economies, in relative terms EM growth continues to outstrip DM growth," Hatzius said. "Our projections imply that the world’s five largest economies in 2050 (measured in real USD) will be China, the U.S., India, Indonesia, and Germany (with Indonesia displacing Brazil and Russia among the largest EMs). By 2075, with the appropriate policies and institutions, Nigeria, Pakistan and Egypt could be among the world’s largest economies."
Theme #3: The United States takes a step back.
Hatzius thinks U.S. economic output will come down to Earth over the long term.
"The US’s relative performance has been stronger than expected over the past decade," the economist added. "However, history suggests it is unlikely to repeat this over the next decade. U.S. potential growth remains significantly lower than that of large EM economies, and we expect some of the US Dollar’s exceptional strength of recent years to be unwound over the next 10 years."
Theme #4: Wealth distribution remains in focus.
"Twenty years of EM convergence has resulted in a more equal distribution of global incomes," Hatzius pointed out. "However, while income inequality between countries has fallen, income inequality within countries has risen. This poses a major challenge to the future of globalisation."