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September 23, 2014 - Latest:

Report: The World Economy in 2050

  • 7 January 2011

That depends on which report you read this week.

Global consultancy PwC and global bank HSBC both predict a huge shift in the balance of power to the emerging economic powerhouses of the world by 2050.

But while PwC suggests a dramatic relative decline for the ‘the West', HSBC sees it more a case of declining continental Europe with the Anglo-Saxon countries i.e. the USA and the UK holding their own alongside the emerging economies.

 PwC sees a general shift to the BRIC countries (Brazil, Russia, India and China) plus a handful of others based on GDP. But HSBC says there could be two poles of economic power.

China will be number one in 2050, but it predicts the USA will be just behind and the two will be far ahead of the rest.  HSBC bases its growth estimates on a combination of measures. For example it sets a lot of store by population growth.

PwC has the UK falling from sixth to ninth overtaken by India, Brazil, Mexico and Russia. But even in this more bleak assessment, the UK overtakes France and and comes very close to Germany in terms of GDP by 2050.

This PwC report has led to predictable soul searching from the media. Thisismoney.co.uk suggests the UK will be second tier. While the Guardian declares the UK firmly in the slow lane.

The Guardian message boards are actually split on our place in the world now.

Weimar 1924 writes: "What does this country export!? I am struggling to think of something that has not been bought by a foreign company and which produces tangible goods or services that is not a) financial services b) Oil."

However this provokes this pithy response.                       

Kvlx87 writes: "If foreign ownership disqualifies a country's exports, then China hardly exports anything. Britain is the world's ninth largest exporter and sixth largest manufacturing nation. We are a net exporter of cars, for instance. I happen to work in manufacturing, and, in the case of my company, we export communications equipment. It's sad to see how little people know about manufacturing in the UK."

Kvlx87 might have been happier reading the HSBC report in the Telegraph . It is much optimistic and sees the UK falling just one place to sixth. It reckons we currently stand one place higher at fifth anyway, though once again Britain overhauls France by 2050.

While the HSBC report sees the UK doing a lot of things right, PwC is adamant that this country urgently needs to up its trade links with these newly emerging economies.

However, whether you are very worried about this country's performance or just happy we are going to beat France, what does it mean for your asset allocation?

Should you be following PwC's economic advice to the UK and boosting your holdings in the world's new economies?

This Telegraph article by Fidelity's Tom Stevenson, while noting that stock markets do not necessarily follow GDP growth up, gives a good assessment of the arguments in favour of investing in the new economies long term.

viewtoday agrees: He writes: "The question really is can an investor risk not being invested in these emerging economies. Japanese growth is also possibly indicative of transformational demand moving towards Asia. Argentina saw record growth last year in the Latin American economies. With improved political stability emerging economies will continue to give return to investors."

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