Emerging markets to lead the way in next decade: StanChart
STANDARD CHARTERED Bank is forecasting average growth of 3.5 per cent in global gross domestic product for the 2000-2030 period, well above the 3.0-per-cent rate in the prior 20 years, helped by an expected pick-up in global expansion over the rest of thi
The research expects China to lead the way on reform. This could enable its economy to deliver average growth of 7 per cent between 2013 and 2020 and, with rebalancing of the structure of its economy already under way for more sustained growth, 5.3 per cent for 2021 to 2030.
As economies across Asia, Africa and Latin America transform themselves on the back of growing populations, an expanding middle class and rapid urbanisation, the share of emerging-market economies could rise to 63 per cent of world GDP by 2030, from 38 per cent today. The increasing size of these faster-growing countries is a key driver of the super-cycle.
Meanwhile, world trade could quadruple in value to US$75 trillion over this period, supported by new regional and bilateral trade agreements and the effects of globalisation and the Internet, which are encouraging the trade of services as well as goods.
StanChart’s 2010 report defined the super-cycle as “a period of historically high global growth, lasting a generation or more, driven by the opening up of new markets, increasing trade, and high rates of investment, urbanisation and technological innovation”.
Although scepticism has risen in recent years as a result of a slowdown in some major emerging economies and also because of the severity of the euro-area crisis, StanChart’s new report suggests that a modest set of reforms could trigger a growth revival in several large emerging economies, including China, India, Indonesia, Nigeria and Brazil.
The growing scale of the emerging economies is key to providing momentum to world growth. For example, economies with growth rates exceeding 4 per cent – primarily consisting of emerging economies – now account for 37 per cent of the world GDP, up from 20 per cent in 1980. Their share is set to reach 56 per cent by 2030, according to the revised forecasts. Asia (excluding Japan) is likely to account for two-fifths of global GDP by 2030.
The report also argues that 70 per cent of global economic growth between now and 2030 will come from emerging economies. China could become the world’s largest economy by 2022 (against 2020 previously forecast), surpassing the United States, but its per capita income would still be less than one-third of the US, implying significant scope for further growth. South-south trade (or trade among emerging economies) is likely to account for 40 per cent of world trade in 2030, up from 18 per cent today.
Most of the 1.1-billion population increase by 2030 will be in emerging markets, led by economies in South Asia and Africa, providing a sustained driver for economic growth.
Meanwhile, many developed economies are healing from the 2008-09 financial crisis. According to the revised estimates, the US economy has the strongest momentum in the developed world, with private-sector balance sheets largely fixed. The world’s largest economy is estimated to grow at an average 2.8 per cent from 2013 to 2020 and 2.5 per cent in the following decade.
John Calverley, the bank’s global head of macroeconomic research, said recent pessimism about emerging markets was overdone. While StanChart has lowered its long-term forecasts for China, India and Europe, it insists the case for an emerging-markets-led super-cycle still holds. Successful reforms will be critical for these economies to realise their catch-up potential.
