China wanes as India gains: Europe’s top investment firm pivots on long-term global economy prediction

Europe’s biggest asset manager Amundi has revised its macro long-term projection for global economic growth, predicting decelerating growth in developed markets and China, as other Asian economies, notably India, pick up the slack.

Amundi’s Central Macro Scenario for 2025 sees three key factors – largely predicated on an erosion of globalist thinking – fundamentally impacting the global economy over the medium- to long-term: increasing geopolitical fragmentation; a stunted and fragmented climate transition; and the uneven and potentially waning impact of AI on productivity.

This represents a notable shift from its 2024 CMA forecast, which foresaw minimal deviation in social, economic, and technological trends from historical patterns.

On the socio-economic front, Amundi sees regional rivalry becoming an increasingly “dominant narrative”, as domestic and regional issues are prioritised over global cooperation. This, the global asset manager predicts, will see an increased focus on energy and food security within regional confines, often at the expense of broader development goals.

Increasing concentration of resources within these regions could, it is feared, exacerbate the wealth and resources divide.

“In this starkly divided landscape, investments in human capital are unevenly distributed, further exacerbating disparities in economic opportunity and political power,” Amundi Investment Institute’s head of emerging macro strategy Alessia Berardi writes.

However, emerging markets could benefit overall from their demographic dividend. Declining fertility rates and shrinking working-age population in developed and fast-developing markets, including China, could see increasing dependence on new technologies, including AI, to limit their productivity slide, while emerging economies will be able to leverage their young workforces to turbocharge their budding economies.

“Only those countries enjoying a positive demographic dividend such as India and Sub-Saharan countries are able to grasp both the positive effects of younger and more productive economies, enjoying higher sustainable potential growth for longer.”

On climate, Amundi sees a more disorderly, fragmented and delayed net zero transition over the longer term, leading to “deferred economic costs and softening inflation peaks”.

“Enactment of emission policies is more gradual, translating into modest initial increases in carbon prices and investments in infrastructure to ensure energy transmission and grid stability are challenged by shifting policy agendas that have to cope with the new geopolitical environment.”

Meanwhile, according to Amundi’s simulations, AI adoption should progressively boost productivity at the global level, reaching its peak within the next decade.

“Lower costs for AI models could lead to faster adoption by both corporates and households, higher spending, and aggregate investment for AI, boosting aggregate productivity.”

Asian technology leadership is set to be a larger contributor to global growth in the future.

“Asia’s growth premium is likely to persist, fuelled by technological advancements that are reshaping economies and creating substantial investment opportunities.

“With a strong commitment to innovation and a young, tech-savvy population, the region is positioned as a leader in the global tech landscape.”

Amundi notes that Asia is already a “powerhouse” in technology manufacturing and innovation, leading in various fields including: manufacturing and supply chain technology (China and Vietnam), semiconductor production (Taiwan and South Korea), fintech innovations and financial inclusion (India), and e-commerce.

In 2023, Asia accounted for 76.6% of World IT Goods Exports and 33% of World IT Services Exports, with China and India, respectively, leading the two segments.

In the medium- to long-term, insufficient early efforts to mitigate climate risks will lead to increased chronic physical costs across regions. This, combined with the waning impact of AI on productivity, will ultimately shift potential growth to be primarily driven by demographic factors.

“Consequently, we will see a deceleration in potential growth across developed markets and China, while Asian countries like India will play an increasingly significant role,” Amundi concludes.

In the decade to 2034, Amundi forecasts a standout 3.3% average GDP growth for emerging markets. This compares well to the against US and Euro area, predicted to see growth of 2.0% and 1.0%, respectively.

Over the subsequent decade, the GDP for the US is forecast to retract to 1.7%, while EMs will pull back to 2.3%. The Euro area will see an increase to 1.4%.