Developing economies are in the early innings of an extended surge in population and economic importance.
While emerging markets are widely expected to account for a larger percentage of economic activity going forward, the true magnitude of the developing world — and its expected growth — eludes most investors. Below are several visual representations of the sheer size and economic potential of emerging and frontier markets. (Note: the term “emerging markets” is used throughout this article to refer generally to non-developed economies.)
Chart #1: Population Boom
Emerging markets already represent a significant part of the global population, but the growth story is still in the early stages. Over the next several decades, countries that fall into the bottom half of the World Bank’s four income groups are expected to experience huge growth, while advanced economies will remain relatively flat.
Data Source: United Nations
Charts #2 and #3: The World in 2050
Among the 15 countries expected to have the largest population in 2050, only one is currently classified as developed by index provider MSCI: the United States. Eight others are classified as emerging, while the remaining six are either frontier markets (Nigeria, Pakistan, and Bangladesh) or not even classified by MSCI (Ethiopia, Congo, and Tanzania).
The following chart shows the breakdown of the 22 largest countries by population in 2050; Japan and the U.S. are the only countries in this group that are currently developed.
Data Source: UN Projections using MSCI Classification
The following table lists these 22 countries, along with the population expected in 2050 and the current development status according to MSCI:
Data Source: United Nations
Chart #4: Africa > Europe + Americas
Although Africa’s importance to the global economy is relatively minor now, the massive population growth expected to occur on the continent will command attention. By 2050, Africa will be home to a population 20 percent larger than North America, South America, and Europe combined:
Data Source: Pew Center
Chart #5: India > Developed Markets
India is expected to be the most populous country in the world over the next several decades, surpassing even China. Relative to many developed economies, the comparison won’t even be close; in 2050, India will be significantly larger than the entire developed world:
Data Source: United Nations. Assumes median population projections.
Chart #6: Emerging Markets Economic Potential
The emerging-market expansion isn’t simply fueled by headcount. Many less developed markets are expected to see per capita GDP growth above 3 percent per year until 2050:
Data Source: PWC
For comparison, the U.S. per capita GDP is expected to grow at a rate of 1.8 percent annually.
Charts #7 and #8: GDP Leaderboard Changes
As emerging markets experience both population growth and per capita GDP growth higher than their developed counterparts, the economic “leaderboards” will undergo a dramatic transformation.
China is expected to remain the world’s largest economy, but very few positions are stable. Nearly every developed economy is expected to fall down the list, while every developing economy will rise. (Argentina is a notable exception.)
Image Source: PWC World in 2050 Report. Reflects total GDP at PPP.
Visualized another way, several major developed economies will be eclipsed by emerging markets by 2050. The following table shows the economies that will surpass the US, Japan, Germany, Italy, and Australia by 2050:
Data Source: PWC
Charts #9 and #10: Greece Is Insignificant
Greece has dominated the headlines over the past few years, as the back-and-forth of the debt saga there has both alarmed and delighted investors around the globe. Though entertaining, Greece is ultimately insignificant to the global economy; the population of about 11 million represents the number of children born by September each year in China:
Data Sources: Chinese Embassy, MacRumors
To put the insignificance of Greece in perspective in another way, there are currently 13 cities in emerging markets (including four in China alone) that have a larger population:
Bonus Chart: Russia Is Really, Really Big
Russia is one of the few dull spots among emerging markets. The country relies heavily on oil and gas production, is expected to experience a population decline, and is generally hampered by corruption. But it does have one thing going for it: Russia is really, really big.
The resort town of Sochi in western Russia is nearly as close to Maine as it is to Uelen, a small city in the east of Russia. Sochi is almost as close to South Africa and Brazil as it is to the eastern edge of Russia:
Distance from Sochi, Russia. Data Source: Google Maps
About the Author: Michael Johnston
Michael Johnston is the Senior Analyst for All Emerging Markets and serves as the COO of parent company Poseidon Financial. His investment expertise has been featured in The Wall Street Journal, Barron’s, and USA Today, among other publications. He resides in Chicago.