John Morrissy, Canwest News Service
Published: Tuesday, March 25, 2008
OTTAWA – The economies of Mexico, Brazil, Russia and even Indonesia will surpass Canada’s in the coming years as emerging nations recreate the world’s financial order, a PricewaterhouseCoopers report said Tuesday.
In the face of such global competition, “Canada’s share of the global economy is projected to diminish,” said Ed Mansfield, the head of PwC’s economics practice in Canada.
“To maintain our competitive position, Canadian businesses will have to differentiate through innovation and technological progress. This will require greater investments in education and capital equipment to promote the productivity gains necessary for economic growth.”
In the meantime, the growth engines of the 20th century will become the Tier 2 players of the 21st as countries such as China overtake their now larger rivals in the Organization for Economic Co-operation and Development (OECD), the report said.
It forecasts: China will surpass the U.S. to become the world’s largest economy in 2025; Brazil will overtake Japan by 2050 to move into fourth place; India’s economy will grow to 90 per cent of the U.S. economy by 2050; and Germany, the powerhouse of Europe’s economy, will also fall before the might of Russia, Mexico and Indonesia.
As for Canada, the report predicted its economy will be surpassed by India in 2014, Brazil in 2016, Russia in 2020, Mexico in 2024 and Indonesia in 2037. It will even be rivalled by Vietnam, whose economy is forecast to grow at 9.8 per cent per year over the next four decades, in 2050.
The report highlighted the fact that strength in emerging economies has now grown beyond the so-called BRIC_countries (Brazil, Russia, India and China) into the “Emerging Seven (E7),” which includes the BRIC countries as well as Indonesia, Mexico and Turkey.
Mansfield said the Canadian manufacturing sector, particularly in low- and medium-skilled industries, will continue to be the victim of low-cost production in developing countries.
To survive that onslaught, Canadian manufacturing must find its future in higher-valued industries, Mansfield said, and continue to build on emerging strengths in areas like biotechnology and new media, which already employs upwards of 60,000 Canadians in fields such as video-game development.
Environmental technologies, companies “on the leading edge of sustainability,” energy and utility companies whose products and equipment will continue to see strong demand, and financial services are all areas of future opportunity, Mansfield said.
Yet “the rapid growth of the emerging economies does not mean the demise of the established OECD_economies. In fact it should prove to be a boost for them through growing income from exports and overseas investment, even as the OECD share of world GDP declines,” said the report’s author, John Hawksworth.
Canada’s resource base will remain strong, and its multicultural makeup – with established social and cultural ties to the developing world – will put it in a unique position to prosper from new opportunities, PwC said.
It said retailers will be likely winners, benefitting from lower-cost imports into OECD_markets, while also having the potential to open new stores in the E7 countries.
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