The problems with forecasts of economic growth among the world’s largest nations is that, as the timeline of the forecasts move further and further into the future, these forecasts become less reliable. Nevertheless, the Centre for Economics and Business Research (CEBR) made several predictions that are as long term as 2030. Among these:
World Economic League Table 2013 shows China overtaking US in 2028; UK to overtake Germany ‘around 2030’
- China’s GDP in $ to overtake the US only in 2028 — much later than most previous predictions
- India’s GDP overtakes Japan also in 2028
- UK does second best of advanced economies and overtakes Germany to become the largest Western European economy ‘around 2030’
- Brazilian economy to remain behind the UK until 2023 — at the time of the football world cup in 2014 ‘at least Britain will beat Brazil at something….’
The most controversial forecasts of gross domestic product always involve China’s place in the world compared to America. At stake is a century or more of U.S. dominance, versus the People’s Republic’s state-controlled economy fueled by its hundreds of millions of workers, almost all of whom are paid wages that are a small fraction of what American workers are paid. The cost advantage has made China the single greatest export machine to developed nations. However, it is shackled by higher worker compensation, a manufacturing cost efficiency advantage that has begun to shift to nations such as Mexico and Vietnam, a middle class that tends to save rather than spend and the limiting factors of industrialization that include terrible air and water pollution.
China’s central government recently set GDP expansion for next year at 7.6%, well below its average over the past decade.
On the side of an ongoing U.S. GDP advantage are the current upswing of more than 4%, an erosion of the unemployment rate fueled by the improving economy, a fast recovering housing market that gives Americans more home equity and a stock market that has much more than doubled since 2009.
The CEBR does not readily admit all these limiting factors. If economic growth rises, and China’s expansion is undermined by a drop in its export rate and its inability to manage the by-products of huge industrial growth, there are many reasons the forecast could be wrong.