E7 GDP to Exceed G7 by 2020; Domestic Banking Assets by 2036 (PwC)

The combined GDP of the "E7" emerging markets of China, India, Brazil, Russia, Mexico, Indonesia and Turkey will exceed those in the "G7" countries of US, Japan, Germany, UK, France, Italy and Canada by 2020 – sooner than what was predicted before the financial crisis, according to PricewaterhouseCoopers’ The World in 2050 report (measured by GDP in purchasing power parity (PPP) terms, which adjusts for price level differences across countries).

The PwC researchers also found that the domestic banking assets of the E7 would likely exceed the G7 banking assets by 2036, and will be 50 percent greater by 2050.  Following this data, China could become the biggest banking market in the world within 15 years (with predicted domestic assets of over US$30 trillion), as part of a shift which accelerated after the financial crisis. India, is predicted to possibly overtake Japan and become the third largest by 2035; Brazil was cited as set to overtake Germany and the UK by 2045. The one exception in acceleration of this emerging market banking trend was cited as Mexico, which is now expected to overtake Italy in around 2048 as opposed to 2038, the date projected in 2007.

Implications & Historical Context
Beyond GDP and banking assets, the report’s general conclusion is that investors with long-time horizons should look beyond the BRICs, as other emerging market economies will provide greater growth acceleration as the overall landscape. 

In historical context, PwC argues that the renewed dominance of countries like China and India, with their large populations, is a return to the historical norm prior to the Industrial Revolution of the late 18th and 19th centuries, which caused a shift in global economic power to Western Europe and the US; a trend PwC says is now happening in reverse. 

The implications include: increased competition from emerging market multinationals as they steadily move up the value chain in manufacturing and some services (including financial services given the weakness of the Western banking system after the crisis), and enormous new opportunity for Western companies which can establish themselves in these markets to benefit from the the rapid growth of a domestic middle class, and the consumer markets they represent.

Business and Leadership: E7 banking markets will overtake G7 by 2036 – PwC
Daily Telegraph UK: Emerging market banks’ assets to overtake G7 banks by 2036
PricewaterhouseCoopers: The World in 2050
Image: China Central Bank, Reuters

This entry was posted on Friday, June 3rd, 2011 at 8:50 am. It is filed under Economic Trends, Finance and tagged with Brazil, China, E7, G7, India, Indonesia, Mexico, PricewaterhouseCoopers, Russia, Turkey. You can follow any responses to this entry through the RSS 2.0 feed.