By 2020, three of the world’s five largest economies will be emerging countries, accounting for 30.4% of global gross domestic product (GDP) in purchasing power parity (PPP) terms [1]. At this date, the world’s largest markets will be China, the USA, India, Japan and Russia. “Advanced economies are being displaced by emerging market superpowers, notably the BRIC countries, which has been accelerated by the seismic effects of the global economic downturn of 2008-2009,” says Media Eghbal, Country Insight Manager at Euromonitor International.

Top 5 Largest Economies in 2020 and their Share of World GDP in...

Top 5 Largest Economies in 2020 and their Share of World GDP in PPP

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), International Financial Statistics (IFS)

India overtook Japan as the world’s third largest economy in PPP terms in 2011 and its demographic advantage means the country could become the world’s biggest economy in the coming decades.

Euromonitor International predicts that China will become the world’s largest economy in PPP terms in 2017 and will account for 19.0% of global GDP in PPP terms by 2020. However, China is also facing big challenges, including rising labour costs, pollution, a potential real estate bubble and rapid ageing. The market research firm predicts that China’s working age population (aged 15-64) will decline from 2014.

Furthermore, Russia should overtake Germany as the world’s fifth largest economy in 2016, driven by its energy sector. The country also offers potential in its rapidly expanding consumer market, which Euromonitor forecasts will be the ninth largest globally in real terms in 2020. However, the lack of economic diversification and modernisation, as well as declining working-age population, remain key long-term challenges.

These shifts will influence global politics, business environments and investment flows while consumer markets in developing countries will rise in importance as the middle class expands,Euromonitor notes.

Actually, global cosmetic players, such as L’Oréal, Estée Lauder or Procter & Gamble are already anticipating the shift. L’Oréal for instance is investing heavily in India and recently inaugurated a new Research and Innovation (R&I) Center to study Indian hair and skin specificities. The French cosmetics giant aims to quadruple its sales in this country. “New markets” (Asia-Pacific, Eastern and Central Europe, Africa, and Middle-East) are already L’Oréal’s number one geographic zone, accounting for 40% of the group’s turnover. Last November, the group inaugurated a giant factory in Indonesia to serve South-East Asian markets, and it will open a new plant in Egypt in 2013 to serve the Middle East area.