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The Actuary The magazine of the Institute & Faculty of Actuaries

UK set to be fastest growing G7 economy for next 30 years despite Brexit

With estimated annual growth of approximately 1.9%, the UK is forecast to be the fastest growing economy in the G7 over the period to 2050, according to a PricewaterhouseCoopers (PwC) paper released today.

Relatively positive growth projection for the UK ©iStock
Relatively positive growth projection for the UK ©iStock

The World in 2050 report projects that the UK will fall from 9th to 10th place in the global economy rankings in terms of purchasing power parity (PPP) by midway of this century, and from 5th to 9th at market exchange rates.

However, despite some medium-term drag as a result of Brexit, The UK will grow faster than other large European countries in the long-term due to its relatively high projected working-age share of the population.

PwC chief economist, John Hawksworth, said: “After a year of major political shocks with the Brexit vote and the election of President Trump, it might seem brave to opine on economic prospects for 2017, let alone 2050.

“But by looking beyond unpredictable short-term economic and political cycles and focusing on fundamentals, long-term growth projections can actually be more reliable than short-term forecasts.

“Our relatively positive long-term growth projection for the UK is due to favourable demographic factors and a relatively flexible economy by European standards.

“However, developing successful trade and investment links with faster-growing emerging economies will be critical to achieving this, offsetting probable weaker trade links with the EU after Brexit.”

The world economy is expected to double in size by 2042, growing at an average annual rate of 2.5% up to 2050, with six out of the seven largest economies projected to be emerging markets.

The top 10 forecast global GDP rankings in PPP terms (US $bn at constant 2016 values) are shown below:

Source: PwC
Source: PwC

China will move further ahead of the US as the world’s largest economy in PPP terms by 2050, with India moving into second place, Indonesia climbing to fourth position, and Brazil making up the top five.

Global growth is expected to be driven by emerging markets, with Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of 3.5% over the next 34 years, compared with a 1.6% average for G7 countries.

“Emerging economies offer great opportunities for business – the numbers in our report make it clear that failure to engage with these markets means missing out on the bulk of economic growth we expect to see in the world economy between now and 2050,” Hawksworth continued.

“To succeed, businesses will need to adopt strategies with the right mix of flexibility and patience to ride out the short-term economic and political volatility that is a normal feature of emerging markets as they mature.”