Citigroup: US will be 3rd-largest economy by 2050

China will be on top by 2020, then India 30 years later, a Citigroup economist predicts. Where to invest? Try emerging markets.

By Charley Blaine Feb 25, 2011 2:36PM
Image: Globe (© Comstock/SuperStock)Get used to it. The United States isn't going to have the world's largest economy much longer.

China's will be tops by 2020. But China won't be there all that long either, according to Citigroup global chief economist Willem Buiter. India will have the biggest economy by 2050, he predicts.

Both countries are the world's fastest-growing economies. China predicts its economic growth will be 9% this year, BusinessWeek reports, while India's could hit 9.25%. The growth in India is so fast that officials are trying to figure out how to curb 9.4% inflation.

There's good news in this, Buiter wrote in a research report this week. The world, as CNBC noted today, is going to become richer and richer as developing economies play catch-up in coming years.
"We expect strong growth in the world economy until 2050, with average real GDP growth rates of 4.6% per annum until 2030 and 3.8% per annum between 2030 and 2050," Buiter wrote.

"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, even if it means power will shift from the West to the East very quickly.

Developed economies have been struggling.

And the U.S. economy? Well, it plugged along at 2.8% in the last three months of 2010 and is forecast for 3.9% this year. But that was before oil prices rose on political violence in Libya and home prices slipped anew. There's also a possible government shutdown looming.

Buiter is no Pollyanna, however.

Growth will not be smooth. "Expect booms and busts," he wrote. "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," he wrote. They will be followed by Middle East, Latin America, Central and Eastern Europe, the Commonwealth of Independent (including Russia, Ukraine and Belarus) and lastly the advanced nations.

"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 ranked countries in terms of six factors that he calls Global Growth Generators. They include: 
  • Domestic savings and investment
  • Demographic prospects
  • Overall national health
  • Educational progress
  • Stable and transparent institutions and policies
  • Trade openness
Using those guides, the nations to watch over the coming years are Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam.

As Karen Maley noted on Business Spectator in Australia, all of these countries are currently poor, so their catch-up growth is likely to span decades. A number of them -- Nigeria, Mongolia, Iraq and Indonesia -- have abundant natural resources. And all except China enjoy favorable demographics.

According to the report, Mexico, Brazil, Turkey, Thailand and other countries would need to implement major adjustments, including raising domestic saving and investment rates substantially, to join Buiter's list. But the report said that those countries "need to achieve political transitions or transformations required to release their economies (and societies) from their decades-old straitjackets."


Kim Peterson contributed to this report.

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86Comments
Feb 25, 2011 8:05PM
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I have my doubts. 20 years ago Japan was supposed to be #1 by now. 20 years before that it was the Soviet Union that was going to eat our lunch. Every economy hits the wall at some point. China and India can't keep growing at 10% per year forever. That being said the US will certainly slip if we don't get serious about increasing savings and investment, and decreasing borrowing and consumption. That also means public investments in education and infrastructure.
Feb 25, 2011 5:04PM
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Folks we don't have to put up with the lack of response from elected officials.  We COULD, if we would ratify amendments to the Constitution stripping THEM of pay and pension, voiding NAFTA, and placing HUGE tariffs on foreign made goods in order to force manufacturers to bring work back home. 

 

We SHOULD (by such Amendments) set term limits on career politicians; eliminate pensions of elected officials; roll back their salary to 1990 levels and limit all future increases STRICTLY to the rate of inflation;  reduce the size of Congress to 1 rep per state; and eliminate life time appointment of all judges and politicians to 10 years max same as the President.  Tax breaks for corporate free loaders should also be eliminated and the Personal Income Tax eliminated on annual income less that $1-M.   AND MOST IMPORTANTLY, MAKE ALL FEDERAL OFFICIALS INCLUDING CONGRESS SUBJECT TO ALL LAWS THEY PASS. 

 

Unless we FORCE their hand by such Amendments, the economy will continue to falter and the rich will continue to get richer as they further decimate the middle class.   The Tea Party  is not the answer as they are just a tool (as is Faux News) of the ultra-rich wholly intended to keep the middle class divided and at each others throat.

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who is to blame, of course it's labor, those damn workers, now shift gears to the greedy who exploit child labor overseas, to those corporations who export our technology to China and India to make profits overseas, to those CEO's who who believe they deserve millions and can't see to pay good wages and benefits to those who actually produce the goods, to those who hate our labor force who want health and safey on the job, etc.  You can bet labor will be blamed on our sinking as an economic force but very little discussion to uncreative, dime a dozen CEO's who sell out our technology or innovation to China for excess profits.  The real crime is, money in our country has convinced workers to hate themselves and to settle for subsistance wages and if they don't like tough.  How about pro labor legislation (which is really pro family) instead of more and more for the rich
Feb 25, 2011 4:41PM
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If we keep electing politicians in Washington who are run by special interests along with zero consideration for fiscal responsibility we will be a third world country, not just a third world power. We have already been toppled from the number one power in my opinion. We need some real leadership in Washington.
Feb 25, 2011 4:22PM
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Well what do you expect we ship our jobs to India and China then we wonder why our country's economy continues to go down hill.  Yes the rich don't care about the rest of us because they control our government and ecomony.

 

The rich keep getting richer and the rest of us can go to hell is what they say.  If we become a third world country we will truly regret letting the government allowing all those tax breaks for big business to ship all of our jobs out of the country. 

Feb 25, 2011 4:14PM
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Keep sending our jobs to India and China. Great job greedy americans.
Feb 25, 2011 11:42PM
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This isn't news. We've known that although the per capita income in these countries would initially be lower than that of the US, their demographic advantage (what many consider a disadvantage) would allow them to pull ahead of the US. There are more workers who work for cheaper labor. You don't have to be an economist to rationally comprehend this inevitability.

Here's where I diverge from the majority of Americans who fundamentally subscribe to capitalism to the point of fanaticism as though Jesus himself was baptized in dollars with Benjamin Franklin's face imprinted on them, Americans have idealized corporations since WWII (when the US broke from the pack and lead the world-at least economically). And we have idealized corporations as American institutions, to the point where we defend them when our countrymen raise objections or concerns pertaining to them. These corporations have increasingly overtly demonstrated that their legal responsibility is to those who hold their stock and not to the advancement of the country in which they were once established. And maybe this is rightly so, but Americans should not then behave in a manner of aloofness or indignation when these companies who claim to bleed and defecate red, white, and blue, then decide to relocate their headquarters in Shanghai or Beijing. And Americans should not then adopt a mob mentality, and go after those who work from 9-5 and were daring enough to organize a union whereby the members of that union would receive an appropriate allocation of the American pie. I think our attention has negatively shifted from corporations who reimburse their CEO's with exorbitant amounts of money while laying off a significant population of America's workforce to those who are compelled from their sleep at 3,4, or 5 in the morning to work just so their kids don't go to school with stomach's that howl.
Feb 25, 2011 5:21PM
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The article is a bunch of negative opinions and flaky assumptions. This is like the 1980's articles that said Japan was going to crush us economically. The writer of this article does not explain why the US would stagnate and China and India would have unlimited growth and prosperity.

 

China and India have massive problems - like over 600 million people in poverty and without even clean water. If the analysis doesn't include any of the things holding an economy back - it's just flaky propaganda.

Feb 25, 2011 8:28PM
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citigroup would like all of you to invest overseas where there are less restrictions on how much you can steal from the poor...why are they even called an american company?....i hope all you who do go overseas with your money, will move over there somewhere and see how it all works out for you...no...you will hide behind the protection of this country while you stab the american worker in the back....
Feb 25, 2011 5:04PM
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Then we can stop funding the world... let China and India fund them.
Feb 25, 2011 5:41PM
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It is ever so true "opinions are like aholes, everyone has one and they all stink" .   We can speculate about the future all we want but most of the economic "thinkers" cant get tomorrow correct.  Just yesterday they were justifying oil and stock prices on the rumor that Ghadafi was shot. With this being said, how are we supposed to figure out the world economy 40 years from now especially of two countries where in one they eat tiger penis to perform better and the other they let cows crap in the living room.  

Feb 25, 2011 7:56PM
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You know why is it a glass half full country that we live in.  Even if this guys predictions are right the U.S. is still in solid third place economically.  As others on here have said financial pendlums swing all the time.  Where is this overwelming desire, that we Americans have, to be number one at everything.  I would not live in China or India for their economics.  America will be back on top again economically but lets not be greedy.  Also I'll settle for third place if my country is safe and it's people are happy.  Life is a series of ups and downs and as long as we don't fall to far down we'll be just fine.  Now having said that our leaders need to focus on things to keep us at the top.  Slipping to third is not horrible but I would say slipping to fifth would be a clear disaster.  So when I write this it's not for our leaders and economist to become complacent.  I hope the powers that be do what it takes to keep us on top economically and I hope we never fall so badly that our way of life is threatened.  Good Day, Matt.

Feb 25, 2011 6:16PM
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Hmmmm...and this prediction is from Citicorp...the same company who a couple of years ago would have been history had it not been for the US government. If memory serves these same folks predicted Japan would rule the world one day because of their work ethic and business smarts. And now Japan's prospects have dimmed as it worries if it will be able to take care of itself as the population ages and the guys with the business smarts don't seem so smart. Don't know if I'm gonna put a lot of credence in the "fine folks at Citi" but rather wonder if they will be around in 2020 or 2050....
Feb 25, 2011 6:39PM
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Wow #3 !!Surprises me. I figured not only China and India biut that Brazil and the eurpean union would eventually pass up the usa. With the crooks and wimps we send to washington anything could happen.
Feb 25, 2011 8:41PM
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The good news is that a lot of us will be dead by then. The bad news is that our children hopefully will not be. Aren't you proud of the overwhelming debt that we are leaving to our children. That is unless you are one of the wealthiest and then what the hell let the poor people pay for the national debt. lets start another war and cut education spending that will continue our decline to the status of a third world nation.
Feb 25, 2011 7:58PM
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When you have a billion people, you can have a large economy and still be poor.

 

And wasn't Japan going to rule the world in the '90s?

Feb 25, 2011 6:32PM
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What bothers me the most about the US slipping behind China is that China is not a democracy.  Do we really want a Communist country, ruled by what is essentially a tyrant, to be the most powerful country in the world?  Would you want Stalin or Hitler to be in charge of 1 billion people, and the worlds biggest economy?  That's what we face with China. 
Feb 25, 2011 11:04PM
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Is anyone terribly surprised?  

 

 We have become of nation of whiners more concerned with being comfortable than with being productive and successful.  Remember the old truism - you are not growing and learning when things are going well. 

 

As long as our society and our Gov't is more concerned with equality of outcome vs equality of opportunity, we will GO BACKWARD.  It is a harsh but (dare I use the term) inconvenient truth that life and our economy (as well as our schools, etc) has winners and losers. 

 

Again, we have lost sight of that both in society and in government.  Life is not fair.  get over it, accept responsibilty and MOVE FORWARD!!!!!!!

Feb 25, 2011 5:14PM
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If the American public would stop demanding everything be cheaper they wouldn't be in this mess.

consumer - "I want this T-shirt to cost me under $20"

manufacturer - "The only way that works is if we make it in China"

consumer - "I don't care where it comes from, only the price"

manufacturer - "Okay then, he's your cheap Chinese goods"

consumer - "Hey, where did all of our jobs go? Herp derp"

manufacturer - *facepalm*

China - "Thanks folks" *pockets money"

Feb 25, 2011 9:42PM
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I don't care if we are the 100th largest economy. I would still rather live here than in any of the places mentioned in this article. With the smog in China and the filth in India I'll pass on these two. Not to mention wait until people in these countries demand greater wages and benefits - then they will be in the same boat as us - BROKE!

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