The team at Goldman Sachs is thinking about global economic growth potential through the year 2075, because of the threat of a global recession in 2023.
It is nearly twenty years since we set out long-term growth projections for the BRICs in Brazil, Russia, India, China, South Africa, and a little over ten years since we updated and expanded those projections to cover 70 emerging EM and developed DM economies, according to Goldman's macroeconomic team in a lengthy 45-sided research paper. Eleven years on, we are updating, expanding and extending our long-term projections, incorporating new data and new methods. Our projections cover 104 countries and we extended our projection horizon from 2050 to 2075. Here is a quick look at Goldman's economic thinking for the next 53 years.
With younger households having fewer children and slowing population growth, Goldman thinks that demographics will put pressure on economic output.
The projections suggest that global growth will average a little under 3% per year over the next ten years and will be gradually declining over the next ten years, primarily due to slower labour force growth, according to Goldman's chief economist Jan Hatzius. The growth of the global population 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 the year 2075. Goldman points out that emerging markets could become the next economic powerhouses, and that's why you should keep an eye on today's emerging markets.
EM growth continues to surpass DM growth despite the fact that real GDP growth has slowed in both developed and emerging economies. Our projections indicate that the world's five largest economies in 2050 measured in real dollars will be China, the US, Indonesia and Germany with Indonesia replacing Brazil and Russia as the largest EMs by 2075, with the appropriate policies and institutions, Nigeria, Pakistan and Egypt could be the world's largest economies in 2050, according to our projections. Hatzius believes that the 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, according to the economist. The history suggests it is unlikely that it will repeat this over the next decade. U.S. potential growth remains lower than that of large EM economies, and we expect the US Dollar's strength to be unwound over the next 10 years. Hatzius pointed out that twenty years of EM convergence resulted in a more equal distribution of global incomes. Income inequality in countries has fallen while income inequality has gone up. This poses a major challenge to the future of globalisation. Sozzi follows BrianSozzi on Twitter and LinkedIn.