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LONDON: China will overtake the United States to become the world’s largest economy in 2028, five years earlier than previously estimated due to the two countries’ contrasting recoveries from the COVID-19 pandemic, an expert group said.
“For some time, a general theme of the global economy has been the economic and soft power struggle between the United States and China,” the Center for Business and Economic Research said in an annual report released on Saturday (December 26).
“The COVID-19 pandemic and the corresponding economic consequences have certainly tilted this rivalry in China’s favor.
The CEBR said that China’s “skillful management of the pandemic”, with its strict early lockdown, and long-term growth impacts in the West, meant that China’s relative economic performance had improved.
China appeared poised for average economic growth of 5.7% a year from 2021 to 2025 before slowing to 4.5% a year from 2026 to 2030.
While the United States is likely to have a strong post-pandemic rebound in 2021, its growth would slow to 1.9% annually between 2022 and 2024, and then to 1.6% after that.
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Japan would remain the world’s third-largest economy, in dollar terms, until the early 2030s, when it would be overtaken by India, pushing Germany from fourth to fifth.
The UK, currently the fifth largest economy as measured by the CEBR, would slide to sixth place from 2024.
However, despite a blow in 2021 from its exit from the European Union single market, British GDP in dollars was forecast to be 23% higher than France’s by 2035, helped by Britain’s leadership in the increasingly important digital economy.
Europe accounted for 19 percent of production in the world’s top 10 economies in 2020, but that will drop to 12 percent by 2035, or less if there is a sharp divide between the EU and Britain, the CEBR said.
He also said that the impact of the pandemic on the world economy is likely reflected in higher inflation, not slower growth.
“We see a business cycle with interest rates rising in the mid-2020s,” he said, posing a challenge for governments that have gone into massive debt to finance their response to the COVID-19 crisis.
“But the underlying trends that have accelerated at this point toward a greener, more technology-based world as we move into the 2030s.”
