|
China, India and Indonesia coming world economic powers: World Bank
11th September 1997 Submitted by Asian-Business. For reproductions, contact publisher@cgtd.com
Back to Asia Pacific Management News Menu | Asia Business News Portal | Asia Business News Feeds | Asia Pacific Management Forum
|
The world economy will change fundamentally over the next 25 years as Brazil,
China, India, Indonesia and Russia assume more central roles in the global
marketplace, the World Bank said on Tuesday.
The Bank forecast that growth in developing countries would accelerate over the next decade, and that the five biggest emerging economies -- China, India, Indonesia, Brazil and Russia -- would become economic powerhouses in the next quarter-century. In its report, titled Global Economic Prospects and Developing Countries, the bank foresaw growth rates in the five biggest such economies running only slightly higher than those for developing nations over all. But the sheer size of China, India, Indonesia, Brazil and Russia and their rapid integration into the global economy will have far-reaching consequences, the report predicted. The rapid emergence of those five nations is likely to "redraw the economic map of the world over the next quarter-century," it said. The international lending agency said in a report that the so-called "Big Five" developing economies, which currently account for less than a tenth of global output and trade, could double their share of the world market and surpass the European Union by 2020. "We stand at a unique moment in history," said Joseph Stiglitz, World Bank chief economist. The bank said growth by developing countries averaged only 1.0 percent a year between 1820 and 1950, about half the rate of many high-income countries. But over the past decade, developing countries, led by the so-called "tiger economies" of South East Asia, grew at a somewhat healthier average rate of 2.6 percent a year. In its report, Global Economic Prospects and the Developing Countries, the bank said the outlook for emerging economies was far more favorable over the next 10 to 25 years. "The next 25 years could witness an unprecendented increase in the weight of developing countries in the world economy," Milan Brahmbhatt, principal author of the report, told a news conference. "This change would be unprecedented in both its size and speed." The bank said growth by developing countries should jump to 5.4 percent from 1997 to 2006. Over the next 25 years, developing countries could grow at an average rate of between 5.0 percent and 6.0 percent a year, it said. But growth will not be restricted to the Big Five. The bank said output could double in the rest of Latin America, Sub-Saharan Africa, the Middle East and North Africa. In the formerly communist economies of central and eastern Europe, better conditions in export markets and continued strength in investment should fuel a rebound in growth to 4 percent or 4.5 percent a year over the next 10 years, the report said. It said there was a risk of backtracking in some regions of the former Soviet Union, but economies there were stabilizing, and growth could reach 5.0 percent to 6.0 percent by the year 2000. East Asian countries may have difficulty maintaining the extremely rapid pace of growth of the past decade, but should continue to rack up solid gains, the World Bank said. The region has been hit by Thailand's financial crisis and $17 billion in loans have not yet restored confidence. The World Bank warned that strong growth by industrial countries over the next year could lead to higher interest rates, which may slow growth in private capital flows to developing nations from the rapid pace of the last two years. This could hurt countries where capital flows are financing high current account deficits and where banks are burdened by bad debt, it added. "But on the whole, the global picture looks very encouraging," Brahmbhatt said. The bank said the changes it predicted could have major trade and labor implications for industrial powers. Developing nations will become the fastest growing markets for all products and some developed countries could find it harder to compete in labor-intensive sectors. But the World Bank said the rewards for rich and poor would far outweigh the short- and medium-term costs. "The potential rewards of this expansion will be very large, both in terms of the growth of important export markets and as a source of imports," Stiglitz said. The bank forecast that growth in developing nations would surge to an average of 5.4 percent a year through 2006, up from 4.5 percent last year and 2.3 percent from 1991 through 1995. Much of the increase, it said, would come from a turnaround in the economies of Eastern Europe and the former Soviet Union, where output declined in the years immediately after the fall of communism. Those economies are starting to grow again, the bank said. The bank said that growth in the thriving economies of East Asia would begin slowing somewhat in coming years, but that growth would pick up in sub-Saharan Africa, which has seen some of the world's worst poverty. The positive outlook for developing nations, the bank said, is driven by stable economic conditions worldwide, including low inflation and interest rates, and by surging flows of foreign capital and expertise into emerging markets. By 2020, emerging nations will become a far bigger factor in world trade, the bank said, creating huge economic opportunities for both industrial and developing nations but also unleashing political pressure to insulate workers and consumers from the turbulence certain to accompany the changes. "The potential rewards of this expansion will be very large, both in terms of the growth of important export markets and as a source of exports," said Joseph E. Stiglitz, the bank's chief economist. "Although there will be transition costs, there is little evidence to justify two of the most common fears, namely downward pressure on unskilled wages in industrial and other developing countries and higher prices for food and energy," Stiglitz said. The five nations will see their share of world output more than double by 2020, to 16.1 percent from 7.8 percent in 1992, the report forecast, adding that during the same period the share of output from the richest industrial countries would fall to 66.7 percent from 81.5 percent. The five big emerging economies will also see their share of worldwide exports and imports more than double in the same period, the report said. "Compared to long-run historical trends in the world economy over, say, the last 200 years, this change would be unprecedented in both its size and speed," said Milan Brahmbhatt, a World Bank economist who is the report's principal author. While the report is upbeat, it noted some of the economic and political pitfalls associated with globalization. "Greater competitive pressures and problems of economic management posed by increased trade and capital market integration can reduce the margin for policy errors, as illustrated by the currency crises in East Asia," Brahmbhatt said.
|
 |
The views expressed here may not necessarily reflect those of Orient Pacific Century or partners
| email updates | email this page | discuss | search | today's asian business strategy news | advertise | about |
| daily asian news, research & commentary for the international business strategy, market research & strategic management professional |