The Blubber

Goldman Sachs Research initially laid out long-term forecasts for the economies of Brazil, Russia, India, and China (the BRICs) nearly 20 years ago, expanding those predictions in 2011 to include additional countries. In their latest analysis, the scope now includes 104 nations, projecting economic trends from now until 2075.

Global potential growth—the maximum rate at which economies can expand without causing excessive inflation—is predicted to average 2.8% annually from 2024 to 2029, gradually declining thereafter, according to Goldman Sachs Research. This is a decrease compared to the 3.6% average before the global financial crisis and 3.2% in the decade preceding the Covid pandemic (measured on a market-weighted basis). One of the primary reasons for this slowdown is the halving of global population growth over the last 50 years, now below 1%, with population growth expected to halt by 2075, based on UN projections. Additionally, declining productivity, partly due to slower globalization, contributes to the expected decline in GDP growth.

“Controlling global population growth is essential for long-term environmental sustainability,” wrote Goldman Sachs economists Kevin Daly and Tadas Gedminas. However, a slower-growing, aging population will also face rising healthcare and retirement costs, with more countries likely to encounter economic challenges from aging populations in the decades ahead.

Emerging markets, particularly those in Asia, are expected to continue growing faster than developed economies, even as global GDP growth slows. These emerging economies will increase their share of the global economy, and their income levels are forecast to gradually converge with those of wealthier nations. China is projected to surpass the U.S. as the world’s largest economy around 2035, while India is expected to rise to the second-largest by 2075, according to the Goldman Sachs report.

China, India, and Indonesia slightly exceeded Goldman Sachs economists' 2011 growth forecasts, while Russia, Brazil, and other Latin American countries significantly underperformed. “We anticipate the global GDP weight will shift even more toward Asia over the next 30 years,” the report stated. By 2050, the five largest economies (measured in U.S. dollars) are projected to be China, the U.S., India, Indonesia, and Germany. Looking ahead to 2075, rapid population growth in countries such as Nigeria, Pakistan, and Egypt suggests that, with the right policies and institutions, these economies could join the ranks of the world’s largest.

The U.S. economy stood out in the past decade, slightly outperforming Goldman Sachs' forecasts for real GDP growth, making it an exception among major developed nations. The dollar’s sharp appreciation also boosted the relative value of the U.S. economy beyond expectations. However, Goldman Sachs economists caution that this outperformance is unlikely to be repeated, partly because the U.S. dollar has risen so much that it is now significantly above its purchasing power parity (PPP) fair value. Moreover, “U.S. potential growth remains well below that of large emerging markets, particularly China and India.”

Two of the biggest risks to these projections, according to Goldman Sachs, are protectionism and climate change. Populist nationalist movements have gained power in several countries, and supply chain disruptions during the Covid pandemic have led to increased focus on resilience and onshoring. This has caused a slowdown in globalization, although not a complete reversal, but the risks remain. For globalization to continue benefiting incomes globally, there will need to be a stronger emphasis on equitable income distribution within countries.

On the issue of climate change, many nations have successfully decoupled carbon emissions from economic growth, which suggests the global economy could follow suit. However, achieving this on a global scale will be challenging. "Sustainable growth will require economic sacrifices and a globally coordinated effort, both of which may prove politically difficult," the Goldman Sachs economists concluded.