Long-term Macroeconomic Forecasts – Key Trends to 2050

Long Term Macroeconomic ForecastsLong-term forecasts and scenarios are vital for businesses that are making strategic business decisions over long time frames, and even though we know they are only approximations, we can learn quite a lot from macroeconomic models.

Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance

A new report from The Economist Intelligence Unit examines some of the big economic issues that will shape global business around the world in the coming decades. The research is based on The EIU’s long-range forecasts for 82 countries out to 2050.

The Economist predicts the top-ten economies to change quite drastically, as can we seen in the graph below. This is an extrapolation of historic economic and population growth, and most likely a quite accurate prediction.

Screenshot 2015-06-24 12.12.48

China is expected to overtake the United States in 2026 in nominal GDP in US dollar terms and maintain its position as the largest economy to 2050. India is expected to move up the rankings to third place, with real growth averaging close to 5% up to 2050. Indonesia and Mexico are expected to leap into the top ten world economies from 16th and 15th place in 2014 to fourth and ninth place respectively by 2050.

Another interesting prediction is that global population growth will slow down. Much of the global growth in recent decades has been driven by population growth. Long-term population estimates, however, reveal that growth in the global population is expected to see a dramatic decline from an average of 1.3% in the 1980-2014 period to 0.5% across the 2015-50 period.

The slowdown in the growth rate of the global working-age population is predicted to be even starker, with a drop to 0.3% in the 2015-50 period, compared with an average growth rate of 1.7% in the 1980-2014 period. This will challenge living standards and welfare of the general population in the future. We will end up in a two-speed society with strong contrasts, unless we can increase productivity substantially for the working class and share welfare democratically on the global level.

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