Long-term growth prospects for emerging economies create both challenges and opportunities for Canada, according to a new report from PricewaterhouseCoopers (PwC).

The report suggests that China could overtake the U.S. by 2025 to become the world’s largest economy and will continue to grow to 130% of the size of the U.S. economy by 2050.

The Indian economy could grow to almost 90% of the size of the U.S. economy by 2050.

Brazil seems likely to overtake Japan by 2050 to move into fourth place, while Russia, Mexico and Indonesia all have the growth potential to surpass the economies of Germany or the UK by the middle of this century.

The most impressive economic growth could be realized by Vietnam, with a potential growth rate of almost 10% annually in real dollar terms. This rapid growth could propel the Vietnamese economy to around 70% of the size of the UK economy by 2050.

“As the economies of emerging nations grow, Canada’s share of the global economy is projected to diminish,” says Edward Mansfield, an associate partner with PwC’s statistics and economics group. “To maintain our competitive position, Canadian businesses will have to differentiate through innovation and technological progress. This will require greater investments in education and capital equipment to promote the productivity gains necessary for economic growth. However, as a highly culturally diverse nation, Canada could be well positioned to capitalize on the growth of emerging markets due to well established cultural and economic links.”

“Non-U.S. trade and investment, both inward and outward, will become even more important to the Canadian economy as demand from BRICs and emerging markets continues to grow. This represents an opportunity for Canada to diversify its trade flows,” notes Mansfield.

Losers are likely to be mass market manufacturers due to increased competition. New lower cost competitors like Vietnam will aincreasingly challenge China as the leader of low-cost manufacturing in the global economy, while China itself moves into higher technology areas.

Accordingly, the downtrend in Canadian manufacturing is not likely to see much relief in coming years as emerging markets continue to present significant competitive pressures in the global goods market.

As well, a higher standard of living in places like China and India may induce highly skilled workers to stay at home rather than relocate to Canada. This could exacerbate the already unfavourable labour force demographics in Canada, where lower population growth is expected to trim the potential growth rate of the economy to around 2.4%.

To download a copy of The World in 2050: Beyond the BRICs, visit www.pwc.com/world2050.