art with code

2009-08-31

GDP projections

I took some GDP and population figures from Wikipedia and NationMaster and tried to predict the future with them.

First off, the current situation:

Region2008 nominal GDP/capitaPopulation in millions
United States47,103310
European Union38,390500
Japan38,055127
Russia12,487142
China3,1741,345
India1,0781,173


Grabbing last decade's average growth rates for each, we can do a linear extrapolation to 2020:

Region2020 GDP/capita2020 population
United States72,900341
European Union73,200661
Japan46,000127
Russia91,000137
China13,3811,431
India2,9901,368


These projections do have some issues though:

Russia posted 6x growth over the last decade, continuing that for a second decade sounds unrealistic, because 1998 Russia was suffering from a big financial crisis. A more realistic 3-4x decade growth would put them at $37,500-$50,000 GDP per capita.

160 million person more people in the EU. The EU population growth is mostly driven by enlargement. To grow by 160 million, the EU would need the Balkans (25 million), Turkey (75 million) and Ukraine (46 million.) And the EUR/USD exchange rate is favoring EUR at the moment, while in 2000 the USD was higher. Using an estimate based on 1999 figures, the GDP/capita projection would be around $67000. Though if the EU population growth misses the spot, the GDP/capita will likely be higher as a result, the possible member countries having a GDP/capita a third or fourth of the EU average.

Japan's low growth is from the bubble bursting in 1996, and the following decade of flat growth. Japan's only now reaching mid-90s levels again; the 1994 and 2008 Japan GDP/capita are roughly the same. Assuming that Japan starts posting decade growth rates in the 1.5-1.75x range, they'd be somewhere between the US and EU in 2020.

2040 projections


The linear projections fail even more for 2040. To highlight, consider Russia's GDP/capita. The 2040 projection is 3.7 million dollars. The whole Russian GDP would be 478 trillion dollars, constituting half the global economy. Which is unlikely, to say the least.

My guess for Russia's growth over the next three decades would be something like 4x in 2010-2020, 2x in 2020-2030, 1.5x in 2030-2040. Which'd put Russia at $156,000 GDP/capita. It might seem high today, but consider that the US GDP/capita thirty years ago was $10,000.

At the rate EU and Indian populations were growing in the last decade, EU's population would overtake India in 2080, and they'd have 3.5 and 3.4 billion people, respectively. The 2040 projection for EU would be 1.15 billion citizens, and that'd require all of North Africa and Middle East, plus perhaps parts of Sub-Saharan Africa, and Russia or Pakistan. Which sounds a wee bit far-fetched. Perhaps there will be an union of unions, or some other export mechanism for the EU's rule-of-law-investment-free-trade-combo.

The EU GDP/capita in 2040 would be around $153,000. The US GDP/capita projection for 2040 is $165,000, and Japan might be somewhere around the two. The linear projection for Japan would have them at $78,000, but that doesn't sound too likely.

The Chinese GDP/capita would be at $174,262 at today's high growth rates, which I wouldn't trust to hold for three decades. Today China's GDP/capita compared to the US is at around 1970s South Korea, or late-50s Japan and Spain. If China sticks to Japan's path (4x, 4.5x, 2.7x), they'll be at around US levels in 2040, perhaps followed by a bubble crash. With the South Korean way (4x, 2.3x, 1.6x), the projection is 35% of the US GDP/capita, or $58,000. The Spanish path (2x, 5x, 2x) would take them to half the US GDP/capita.

India would be the most populous country in the world with 1.86 billion, propelling it past China's projected 1.6 billion. India's 3x per decade growth would bring their GDP/capita to around $18,800. The Indian growth might pick up though, three decades of Japan-style growth would bring them to $58,000. Perhaps a good estimate would be somewhere in between: $32,000?

And then the computational power disclaimer: by 2040, you can get a human brain worth of processing power for something like $100 / year, which nicely throws a spanner in these GDP projections. If each person has a dozen virtual humans running on the side, the amount of stuff that one person can get done might well be multiplied by that.
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