OECD: 'Dramatic shift' in balance of economic power

Shanghai skyline China will be world's largest economy by 2016, says the OECD

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The Organisation for Economic Co-operation and Development (OECD) is predicting a "dramatic shift" in the balance of economic power.

Over the next 50 years, the OECD says emerging economies will account for an ever increasing share of output.

In its report, it says China will overtake the United States as early as 2016.

The OECD expects the current trends of faster growth in emerging economies to continue.

The result is that the largest of them, those with the biggest populations, will overtake what the OECD calls fast-ageing economic heavyweights, such as Japan and the eurozone.

On the basis known as purchasing power parity, which tends to favour emerging countries, China and India combined will be larger than the entire developed world by 2060.

And the OECD predicts that China will overtake the US in the next few years.

The report says gaps in living standards will narrow, but will not be eliminated. In the poorest countries, income per person is predicted to quadruple. For China and India, it will increase sevenfold.

The report assumes that the recent financial crisis has had an impact on the level of economic activity, but none on long-term growth trends.

The report also acknowledges that it ignores possible risks such as disorderly debt defaults and unsustainable use of natural resources.

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