The world is going to become richer and richer as developing economies play catch up over the coming years, according to Willem Buiter, chief economist at Citigroup.
"We expect strong growth in the world economy until 2050, with average real GDP growth rates of 4.6 percent per annum until 2030 and 3.8 percent per annum between 2030 and 2050," Buiter wrote in a market research.
"As a result, world GDP should rise in real PPP-adjusted terms from $72 trillion in 2010 to $380 trillion dollars in 2050," he wrote.
As the world watches oil prices rise sharply amid unrest in the Middle East, Buiter's analysis of the world's long-term prospects offer some hope that better times are ahead but if he is right power will shift from the West to the East very quickly.
"China should overtake the US to become the largest economy in the world by 2020, then be overtaken by India by 2050," he predicted.
One Way Bet on Emerging Markets?
Growth will not be smooth, according to Buiter. "Expect booms and busts. Occasionally, there will be growth disasters, driven by poor policy, conflicts, or natural disasters. When it comes to that, don't believe that 'this time it's different'."
However, there are some easy wins for poor countries with big, young populations, he said.
"Developing Asia and Africa will be the fastest growing regions, in our view, driven by population and income per capita growth, followed in terms of growth by the Middle East, Latin America, Central and Eastern Europe, the CIS, and finally the advanced nations of today," he wrote.
"For poor countries with large young populations, growing fast should be easy: open up, create some form of market economy, invest in human and physical capital, don't be unlucky and don't blow it. Catch-up and convergence should do the rest," Buiter added.
Buiter has constructed a "3G index" to measure economic progress; 3G stands for "Global Growth Generators" and is a weighted average of six growth drivers that the Citigroup economists consider important:
- A measure of domestic saving/ investment
- A measure of demographic prospects
- A measure of health
- A measure of education
- A measure of the quality of institutions and policies
- A measure of trade openness
Using that index the nations to watch over the coming years are Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam.
"They are our 3G countries," Buiter said.