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Emerging markets tipped to be the largest economies by 2020

By Michelle Yeomans , 28-Feb-2013
Last updated on 28-Feb-2013 at 17:00 GMT

Emerging markets tipped to be the largest economies by 2020

Euromonitor’s latest findings comes as good news to the cosmetic giants investing in emerging markets like P&G and Estee Lauder, as the market researcher predicts emerging countries to be three of the world’s five largest economies by 2020.

The five markets include the US, China, Russia, India, and Japan, and China, Russia and India alone are expected to account for 30.4 percent of global GDP in purchasing power parity (PPP) terms by 2020, which is a measurement of different countries' currencies over the same types of goods and services, allowing a more accurate comparison of living standards.  

With cosmetic players like L’Oréal focusing on the Asia-Pacific region of late and Euromonitor noting the emerging markets as driving the global beauty ingredients sector, the researcher's recent findings confirm investments in the region will pay off in the long run.

The recent opening of a new research facility in India , and a construction of its largest factory in Indonesia , has given L'Oreal a strong foothold in the region whilst luxury fragrance and cosmetic combatant Estée Lauder has seen sales increases by 11 percent; the biggest jump in any of the three geographic regions the company is divided into.

Prediction

Although Euromonitor predicts China will become the world's largest economy in PPP terms by 2017, the country is expected to face increasing challenges from rising labor costs and its aging population which will inevitably affect production budgets for cosmetic companies.

Russia is tipped to overtake Germany as the fifth largest economy in 2016, while the US is expected to lose its position as the world's number one economy by 2017.

Meanwhile, India’s demographic advantage could see the country become the world's biggest economy in the coming decades. Euromonitor forecasts that the country will have the world's largest population by 2025, while its working-age population will increase by 11.6 percent between 2013-2020 compared to -3.1 percent in China.

Finally, decades of weak economic growth and deflation has led Japan to the brink of a potential debt crisis, especially if foreign debt increases. Like the US, however, it will remain a global technological leader, giving it a competitive edge over its emerging neighbours.

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