A think tank said that China will overtake the United States to become the largest economy in the world in 2028, five years earlier than previously expected due to the two countries’ paradoxical recoveries from the Covid-19 pandemic.
« For some time, the main topic of the global economy has been economic conflict and soft power between the United States and China, » the Center for Economics and Business Research said in an annual report published on Saturday.
« The Covid-19 pandemic and its corresponding economic repercussions have definitely reversed this rivalry in China’s favor. »
The center said that « China’s skilled management of the epidemic, » with the early strict lockdown it imposed, and the beating of long-term growth in the West means that China’s relative economic performance has improved.
China appeared poised to achieve an average economic growth of 5.7% per year from 2021-2025 before slowing down to 4.5% per year from 2026-30.
While the US was likely to experience a strong post-pandemic recovery in 2021, its growth will slow to 1.9% per year between 2022 and 2024, and then to 1.6% thereafter.
Japan will remain the world’s third-largest economy, by dollar value, until the early 2000s when it is overtaken by India, pushing Germany down from fourth to fifth place.
The United Kingdom, which is currently the fifth largest economy according to CEBR, will decline to sixth place from 2024.
However, despite the blow it took in 2021 from its exit from the European Union’s single market, Britain’s GDP in dollars was expected to be 23% higher than France by 2035, aided by Britain’s leadership in the increasingly important digital economy.
The center said that Europe accounted for 19% of output in the top 10 global economies in 2020, but that would drop to 12% by 2035, or less if there is a sharp split between the European Union and Britain.
She also said that the impact of the epidemic on the global economy is more likely to be seen in higher inflation rather than slowing growth.
« We see an economic cycle with higher interest rates in the mid-2020s, » she said, challenging governments that have borrowed heavily to fund their response to the Covid-19 crisis.
« But the fundamental trends accelerated by this point to a greener and more technology-dependent world as we move into the 2030s. »
