LONDON: China will overtake the United States to become the world’s largest economy by 2028, five years earlier than previously estimated due to the opposing recovery of the two countries after the Covid-19 pandemic, a think tank said.
“An overarching theme of the global economy has for some time been the economic and soft power struggle between the United States and China,” the Center for Economics and Business Research said in an annual report published Saturday.
“The Covid-19 pandemic and its associated economic consequences have certainly turned this rivalry in China’s favor.”
The CEBR said China’s “skillful management of the pandemic,” with its strict early blockage, and the effects of long-term growth in the West, meant that China’s relative economic performance had improved.
China appeared to be poised for average economic growth of 5.7% per year between 2021-25 and slowed to 4.5% per year between 2026-30.
While the United States would likely have a strong post-pandemic recovery in 2021, growth would slow to 1.9% per year between 2022 and 2024, and then to 1.6% thereafter.
Japan would remain the world’s third-largest economy in dollar terms until the early 2030s, when it would be overtaken by India, dropping Germany from fourth to fifth place.
The United Kingdom, currently the fifth largest economy by the CEBR measure, is set to slide to sixth place from 2024.
Despite a hit in 2021 after exiting the European Union’s internal market, UK GDP in dollars was predicted to be 23% higher than France’s by 2035, aided by Britain’s lead in the increasingly important digital economy.
Europe accounted for 19% of production in the top 10 global economies in 2020, but that will fall to 12% by 2035, or lower if there is a bitter divide between the EU and Britain, the CEBR said.
It also said the pandemic’s impact on the global economy would likely be reflected in higher inflation, not slower growth.
“We are seeing an economic cycle of rising interest rates in the mid-2020s,” it said, posing a challenge to governments that have borrowed massive money to fund their response to the Covid-19 crisis.
“But the underlying trends at this point have accelerated towards a greener and more technology-based world as we move into the 2030s.”