Asian cities set to generate half of the world's economy by 2035

16 January 2018 Authored by Consultancy.asia

Asian cities will account for almost half of the economic activity across the globe within two decades according to forecasts by Oxford Economics, with Delhi to lead GDP growth over the next few years.

As it stands, the one third or so of the planet’s population which comprises the top 780 global cities by GDP currently generates 60% of the world’s economic activity, and holds half of its disposable income. By 2035, it’s expected this will rise, with half a billion extra residents and the 264 million of those in employment in these cities contributing a further $32 trillion in combined GDP.

Yet, not all cities are created equally, or at least not all cities develop at the same rate or in synchronised cycles. In this respect, the analysis from Oxford Economics forecasts a dramatic ongoing economic shift toward Asia as growth in the West is constrained by an increasingly ageing or even declining population. So much so, that the cumulative economic activity of Asian cities is predicted to overtake that of North America and Europe combined in as soon as a decade.

Aggregate city GDP, 2006-35

The forecast highlights a staggering shift in the global balance of economic power, where just one decade ago cities in North America and Europe had together a joint GDP at twice that of their collective Asian counterparts. And, while it’s expected that the current economic powerhouses of New York, Tokyo, London and Los Angeles will remain at the very top in 2035, the projection is for Paris to be bumped down from fifth on the list by Shanghai and Beijing, with Guanghou, Tianjin and Shenzhen rapidly gaining ground to all feature in the top one dozen global GDPs.

But while the Chinese economic juggernaut is set to roll on – with the aggregate GDP of its cities forecast to more than double from $11 trillion to $25 trillion by 2035, representing approximately a third of the world’s total and seeing a further 15 of its urban centres joining the 18 currently in the top 100 for economic output – a flattening in the local economy (projected at an average 4.2 percent to 2021) sees a slightly different picture within Asia over the shorter-term.

Among the Chinese-led tilt toward Asia are another four cities in the region which are predicted to climb into the top 100 globally by 2035; Mumbai, Delhi, Bangalore and Kuala Lumpur. And of Asia’s 30 largest cities per GDP, Delhi will be fastest out of the blocks – projected to grow its economy by nearly 50% over the five-year period to 2021 at an annual average rate of over 8%. Led by the business and financial services sectors, several other Indian cities are also tipped to grow at well above 5% over the short-term, including Bangalore and Mumbai.

GDP growth per city in 2035

Yet crashing onto the list of the fastest-growing big cities in Asia over the next five years is Ho Chi Minh City, in the second slot overall. This follows the city’s second-placed global ranking behind Bangalore on the 2017 City Momentum Index compiled by professional services firm JLL, and is driven by a mix of factors including a shift toward the tech and services sectors, low costs and high foreign investment, and a middle-class expected to double in size in the coming years.

As to the remaining non-Chinese or Indian cities analysed as among the top-30 biggest GDPs across the Asia-Pacific region, only Manila in 9th (approx. 6.5%) and Jakarta and Kuala Lumpur feature in the top half for projected GDP growth rates in the coming period, with the latter in 14th and 15th at respectively under six and five percent. Crowding the bottom of the list are cities from Japan, with Nagoya, Tokyo, Yokohama and Osaka making up the bottom four thanks to the country's declining working-age population.

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