Forecasters have good news for those fearing that the UK faces a long, slow decline into economic mediocrity: the UK will still stand tall among the world’s biggest economies in 2030, having overtaken France and even made progress on closing the gap with Germany.
Only India will leapfrog the UK on the rich list of nations, according to a report by PricewaterhouseCoopers (PwC), as previously fast-growing countries Russia and Brazil struggle to make ground on the global league table.
According to the report, the youthful vigor of the UK economy, with its high birthrate and flexible labor market, will contrast markedly with ageing populations in mainland Europe.
Ignoring the potential of Scotland voting for independence, the report forecasts that Britain will remain “a significant member of the global economic A-list.”
Barret Kupelian, an economist at PwC and co-author of the study, said the UK economy had regained its dynamism in recent years in contrast to France.
“The UK should also narrow the GDP gap with Germany over time, although this is projected to be driven mostly by the UK’s more favorable demographics, with a less rapidly ageing population and strong labor force participation rates,” he said.
In the longer-term other emerging markets might overtake the UK, he said, but only India would manage this before 2030, based on GDP at market exchange rates.
Only a couple of years ago, there were forecasts that Britain would rapidly become a second-class economic power and would need to defer to the BRIC countries of Brazil, Russia, India and China in the near future.
China has ranked above Japan for a decade as the world’s second-biggest economy. By some calculations Brazil leapfrogged the UK in 2012, with Russia and India close behind.
The UK’s fall was partly related to the costs of the 2008 banking crisis and the recession that followed, coupled with a sharp decline in the exchange rate, which knocked about a quarter off the country’s value in relation to its main rivals.
However, since the beginning of last year the economy has recovered all the lost ground from the recession and banks have begun lending again. The British pound has bounced back from about US$1.40 in 2009 to US$1.71 today.
Brazil, by contrast, has had a rocky couple of years that have slowed GDP growth and pushed down the value of the Brazilian real. Russia will close the gap on the top eight, but its reliance on the oil and gas industry for growth and its rapidly ageing population will prevent it jumping up the table as quickly as previously thought.
Only India will move ahead of the UK by 2030, though it will be sharing a projected GDP of US$6.1 trillion among more than 1.5 billion people, only half as much again as the UK’s predicted output of US$4 trillion, produced by a population less than a 20th the size.
India will surpass China as the world’s most populous country by 2050, according to research by the Pew Research Center, by which time its population is expected to have increased by 400 million to 1.6 billion.
China, which is projected to add 25 million people by 2050, is regarded as the only major country that will grow old before it gets rich. It should remain the world’s second-largest economy behind the US.