Goldman Sachs Predictions for the Very Long Term

Goldman Sachs Group Inc. economists have taken a stab at predicting the path of the world economy through 2075.

Two decades after they famously outlined long-term growth projections for the so-called “BRIC” economies, a group of economists that is now led by Jan Hatzius expanded their projections to encompass 104 countries over the next half-century.

The results:

• Global growth will average just under 3 percent a year over the next decade, down from 3.6 percent in the decade before the Global Financial Crisis, and will be on a gradually declining path afterward, reflecting a slowing of labor-force growth.
• Emerging markets will continue to converge with industrial nations, as China, the United States, India, Indonesia, and Germany top the league table of the largest economies (measured in dollars). Nigeria, Pakistan, and Egypt could also be among the biggest.
• The U.S. is unlikely to repeat its relative strong performance of the past decade, and the dollar’s exceptional robustness will probably also unwind over the next 10 years.
• Although income inequality between countries has fallen, inequality will continue to rise within nations.

Economists Kevin Daly and Tadas Gedminas see protectionism and climate change as risks that are “particularly important” both for growth and the convergence of incomes. “Our projections imply that we have passed the high-water mark of global potential growth,” the economists wrote in the note. “Most of this projected slowdown is due to demographics. Global population growth has halved over the past 50 years.”

They said slower population growth is “a good problem to have” because it implies less strain on the environment. Nevertheless, it will present “a number of economic challenges,” like how nations will pay for rising healthcare costs for their aging populations.

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