LONDON • China will overtake the United States to become the world's biggest economy in 2028, five years earlier than previously estimated due to the contrasting recoveries of the two countries from the Covid-19 pandemic, a British think-tank said.
"For some time, an overarching theme of global economics has been the economic and soft power struggle between the US and China," the Centre for Economics and Business Research (CEBR) said in its annual report - the World Economic League Table (Welt) - published yesterday.
"The Covid-19 pandemic and (the) corresponding economic fallout have certainly tipped this rivalry in China's favour."
The CEBR said China's "skilful management of the pandemic", with its strict early lockdown, and hits to long-term growth in the West meant China's relative economic performance had improved.
China looked set for average economic growth of 5.7 per cent a year from next year to 2025, before slowing to 4.5 per cent a year from 2026 to 2030. While the US was likely to have a strong post-pandemic rebound next year, its growth would slow to 1.9 per cent a year between 2022 and 2024, and then to 1.6 per cent after that.
Japan would remain the world's third-biggest economy, in dollar terms, until the early 2030s when it would be overtaken by India, pushing Germany down from fourth to fifth, the CEBR said.
The United Kingdom, now the fifth-biggest economy by the CEBR's measure, would slip to sixth place from 2024.
Despite a hit next year from its exit from the European Union's single market, British gross domestic product (GDP) in dollars was forecast to be 23 per cent higher than France's by 2035, helped by Britain's lead in the increasingly important digital economy.
Europe accounted for 19 per cent of output in the top 10 global economies this year, but that will fall to 12 per cent by 2035, or lower if there is an acrimonious split between the EU and Britain, the CEBR said.
Singapore, labelled the world's most competitive economy by the IMD World Competitiveness Ranking this year, is the 39th biggest economy in the Welt report.
"The pandemic had a major adverse impact on the economy of Singapore, with a GDP contraction of 6 per cent forecast for 2020," said CEBR. "Over the next five years, the annual rate of GDP growth is set to rise to an average of 3 per cent. However, between 2026 and 2035, CEBR forecasts that the average rate of GDP growth will dip slightly to 2.5 per cent per year."
The think-thank said the pandemic's impact on the global economy was likely to show up in higher inflation, not slower growth. "We see an economic cycle with rising interest rates in the mid-2020s," it said, posing a challenge for governments which have borrowed massively to fund their response to the Covid-19 crisis.
"But the underlying trends that have been accelerated by this point to a greener and more tech-based world as we move into the 2030s," it added.
• With input from The Sunday Times