Our world 2025
Economy

We will see the first significant shift from a fossil fuel-powered economy towards an era where the world is increasingly powered by renewable energy.

Economy

Even as the global economy adds impressively to per capita wealth, inequality will deepen, and natural resource constraints will start to make an impact.

This will be an era where more emphasis is placed on energy and resource efficiency, and where policy mechanisms are increasingly used to motivate recycling and circular designs.

India will experience extraordinarily strong growth over the next decade and will rival Japan as the world’s third largest economy by 2025. China may challenge the USA as the number one largest economy.

Others in the top 10 by economic size will probably be Germany, France, the UK, Russia, Brazil, - with the 10th position occupied by either Italy, South Korea, Indonesia, Mexico, or Turkey.

ECONOMY: TRENDS

ECONOMY: TRENDS

CONTINUED ECONOMIC GROWTH

By 2030, the Gross World Product per capita will have grown more than 50% from 2010 levels (PPP-adjusted 2005 USD). Growth will mainly come from outside the OECD. Overall global growth is expected to decelerate steadily over this period.

GDP growth PPP in 2030 (blue shading) and GDP per capita PPP in thousands of 2005 USD

2010 2030

Source: European Strategy and Policy Analysis A1:F26 (2013)

RISING INEQUALITY

More than 70% of the global population resides in countries with increasing inequality. This trend is set to continue, and will heighten the potential for social and political instability in many developed countries. Income inequalities are also expected to persist between rural and urban areas, and between women and men.

“We have reached a tipping point. Inequality can no longer be treated as an afterthought…” – José Ángel Gurría, OECD Secretary-General

GROWING PUBLIC DEBT

Accumulated global net public debt could approach or surpass the Gross World Product by 2035 - limiting the capacity of governments to respond to major social, economic, and environmental challenges.

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Source: The Peterson Institute for International Economics (2015)

DEEPENING YOUTH UNEMPLOYMENT

The severe under-utilization of the youth workforce will remain a hurdle for many countries to overcome in their quest to sustain economic growth and enhance quality of life. By 2025, more than a quarter of the world’s youth population (aged 15-24) will have no productive work. Many, especially in developing regions, will be employed only informally.

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ECONOMY: TRADE PATTERNS

ECONOMY: TRADE PATTERNS

Interconnectedness and freer trade could lift 650 million people out of poverty in 10-20 years

ECONOMIC POWER SHIFTS EASTWARD

The epicentre of the world economy is the geographic hotspot based on the distance-weighted GDP of 700 locations. In 1980 the hotspot was in the Atlantic. By 2030 the hotspot will be firmly located between India and China.

Evolution of the earth’s economic centre of gravity (AD 1 to 2025)

1000 1500 1820 1913 1940 1950 1960 1970 1980 1990 2000 2010 2025

Source: The Economist, Jun. 28th, 2012.

ASIA RISING

Asia’s share of global exports is expected to nearly double to 39% by 2030. In 2025, China will still be Africa’s largest trading partner, and developing countries will be shifting into new, higher value trade sectors.

Volume and share of trade in 2012 and 2060


Source: OECD (2014)

REGIONAL TRADE AGREEMENTS

Emerging regional and trans-regional trade agreements will reshape trade and investment flows by 2025 and spur the proliferation of global value chains. These include the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership, and economic communities in Southeast Asia, Africa, and across the Atlantic.

“The question isn’t whether trade matters, but how we can make trade [drive] equitable, sustainable development. An ounce of trade can be worth a pound of aid.” – Ban Ki-moon, Oct 2014

ECONOMIC INTERCONNECTEDNESS

Interconnectedness brings major impetus to freer trade globally that could shift 650 million people out of poverty over a 10-20-year period. This is driven by the growth of global value chains and increasing flows of intermediate goods and services. The materials and technology in a typical iPhone could be sourced from a dozen or so countries.

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ECONOMY: NATURAL RESOURCES

ECONOMY: NATURAL RESOURCES

INCREASED DEMAND

Population growth and new consumption patterns associated with growing prosperity will place ever more pressure on natural resources. Global energy consumption will rise by 20%-35% over the next 15 years and per capita consumption of base metals and steel will grow proportionally with GDP per capita, up to a certain saturation level.


Source: BP Energy Outlook 2035 (2015)

FOSSIL FUELS FEELING THE HEAT

Coal, gas, and oil will continue to account for more than 80% of global energy output in the next decade. However, driven by the fight against climate change and cost pressures, the fossil fuel industry will have enhanced focus on achieving cost and emission reductions.

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CRITICAL RAW MATERIALS

The production of many raw materials is highly concentrated geographically. China holds more than 50% of the known global reserves of nine of fourteen raw materials classified as critical by the European Commission.

Percentage of global production of eu critical raw materials within a single country (2011)

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Source: European Environmental Agency (2013)

WASTE – THE NEW OIL

Waste is increasingly being viewed as a resource, with restoration of used products for resale expanding rapidly. If economies worldwide successfully move to circular models, they could generate at least an extra US$1 trillion a year by 2025 – while creating hundreds of thousands of jobs, and reducing GHG emissions.

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