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Six nations including India to dominate growth by 2025
Washington: Six major emerging economies including India will account for more than half of the global growth by 2025 and it is likely that the international monetary system will not be dominated by any single currency by that time, a new World Bank report said on Tuesday.
As economic power shifts, these successful economies will help drive growth in lower income countries through cross-border commercial and financial transactions, the bank said in its latest report 'Global Development Horizons 2011? Multipolarity: The New Global Economy'.
According to the report, the six countries-- Brazil, China, India, Indonesia, South Korea, and Russia-- will grow on average by 4.7 percent annually between 2011 and 2025.
However, the advanced economies which are expected to grow by 2.3 percent over the same period will remain prominent in the global economy with the euro area, Japan, the United Kingdom, and the US all playing a core role in fuelling global growth.
"The fast rise of emerging economies has driven a shift whereby the centres of economic growth are distributed across developed and developing economies - it's a truly multi-polar world," said World Bank Chief Economist and Senior Vice President of development economics Justin Yifu Lin.
"Emerging market multinationals are becoming a force in reshaping global industry, with rapidly expanding South South investment and FDI inflows. International financial institutions need to adapt fast to keep up," Justin added.
Emerging economies that used to rely on technological adaptation and external demand to grow will have to make structural changes to sustain their growth momentum through productivity gains and robust domestic demand, the report said.
Global Development Horizons maps out the challenges that a multi-polar world economy poses for developing countries over the next 20 years. Growth spillovers are likely via cross-border trade, finance, and migration, which will induce technological transfer, and increase demand for exports, it added.
With the emergence of a substantial middle class in developing countries and demographic transitions underway in several major East Asian economies, stronger consumption trends are likely to prevail, which in turn can serve as a source of sustained global growth.
"In many big emerging economies, the growing role of domestic demand is already apparent and outsourcing is already under way," World Bank Director of development prospects Hans Timmer said.
"This is important for the least developed countries, which are often reliant on foreign investors and external demand for their growth," he added.
"Over the next decade or so, China's size and the rapid globalisation of its corporations and banks will likely mean a more important role for the renminbi," World Bank manager of emerging trends and lead author of the report Mansoor Dailami said.
"The most likely global currency scenario in 2025 will be a multi-currency one centered around the dollar, the euro, and the renminbi," he said.
To sustain growth and cope with more complex risks, economies that are home to emerging growth poles need to reform domestic their institutions, including in the economic, financial, and social sectors.
China, Indonesia, India, and Russia all face institutional and governance challenges. Human capital and ensuring access to education is a concern in some potential growth poles, particularly Brazil, India, and Indonesia.
"The projected changes in the global economy are fundamental. Overall, these shifts will likely be positive for developing countries. However, a key question is whether existing multilateral norms and institutions are sufficiently strong to accommodate the passage toward multi-polarity.
"The challenges of managing global integration among power centers makes strengthening policy coordination across economies critical to reducing the risks of economic instability," Dailami added.
Washington: Six major emerging economies including India will account for more than half of the global growth by 2025 and it is likely that the international monetary system will not be dominated by any single currency by that time, a new World Bank report said on Tuesday.
As economic power shifts, these successful economies will help drive growth in lower income countries through cross-border commercial and financial transactions, the bank said in its latest report 'Global Development Horizons 2011? Multipolarity: The New Global Economy'.
According to the report, the six countries-- Brazil, China, India, Indonesia, South Korea, and Russia-- will grow on average by 4.7 percent annually between 2011 and 2025.
However, the advanced economies which are expected to grow by 2.3 percent over the same period will remain prominent in the global economy with the euro area, Japan, the United Kingdom, and the US all playing a core role in fuelling global growth.
"The fast rise of emerging economies has driven a shift whereby the centres of economic growth are distributed across developed and developing economies - it's a truly multi-polar world," said World Bank Chief Economist and Senior Vice President of development economics Justin Yifu Lin.
"Emerging market multinationals are becoming a force in reshaping global industry, with rapidly expanding South South investment and FDI inflows. International financial institutions need to adapt fast to keep up," Justin added.
Emerging economies that used to rely on technological adaptation and external demand to grow will have to make structural changes to sustain their growth momentum through productivity gains and robust domestic demand, the report said.
Global Development Horizons maps out the challenges that a multi-polar world economy poses for developing countries over the next 20 years. Growth spillovers are likely via cross-border trade, finance, and migration, which will induce technological transfer, and increase demand for exports, it added.
With the emergence of a substantial middle class in developing countries and demographic transitions underway in several major East Asian economies, stronger consumption trends are likely to prevail, which in turn can serve as a source of sustained global growth.
"In many big emerging economies, the growing role of domestic demand is already apparent and outsourcing is already under way," World Bank Director of development prospects Hans Timmer said.
"This is important for the least developed countries, which are often reliant on foreign investors and external demand for their growth," he added.
"Over the next decade or so, China's size and the rapid globalisation of its corporations and banks will likely mean a more important role for the renminbi," World Bank manager of emerging trends and lead author of the report Mansoor Dailami said.
"The most likely global currency scenario in 2025 will be a multi-currency one centered around the dollar, the euro, and the renminbi," he said.
To sustain growth and cope with more complex risks, economies that are home to emerging growth poles need to reform domestic their institutions, including in the economic, financial, and social sectors.
China, Indonesia, India, and Russia all face institutional and governance challenges. Human capital and ensuring access to education is a concern in some potential growth poles, particularly Brazil, India, and Indonesia.
"The projected changes in the global economy are fundamental. Overall, these shifts will likely be positive for developing countries. However, a key question is whether existing multilateral norms and institutions are sufficiently strong to accommodate the passage toward multi-polarity.
"The challenges of managing global integration among power centers makes strengthening policy coordination across economies critical to reducing the risks of economic instability," Dailami added.
