Fortune Will Favour The Emerging Economies

By Author: Lucinda Devine
Total Articles: 4
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HSBC’s 2011 report on the shape of the global economy in 2050 makes clear just how much the emerging economies will contribute to growth
5 Sep 2011:

There may not be much new in the revelation that today’s economic powerhouses may soon be playing second fiddle to the emerging giants of Asia and Latin America. But the sheer extent of change to come over the next 40 years is a salutary lesson for companies taking the long-term view on their trading decisions.

HSBC’s 2011 report on the shape of the global economy in 2050 makes clear just how much the emerging economies will contribute to growth, and what the ‘pecking order’ is likely to be. Among its highlights are the following predictions:

* Of the 30 largest economies, 19 will be emerging markets.
* With China and India in Top 3 positions, other star markets will include Mexico, Turkey, Indonesia, Egypt, Malaysia, Thailand, Colombia and Venezuela.
* Several small but rich economies in Europe will fall sharply down the league due to their ageing populations and ...
... diminished influence.

This dramatic change in fortunes has only just begun, and is down to factors that are largely irreversible such as the future trends in working-age population and very strong Asian growth rates for many years to come.

So, where are the future hotspots for economic growth?

If the statistics are to be believed, the large Asian economies will grow at historically high levels for some time to come. China will retain its place at the top of the economic tree by 2050, but its growth will have been overtaken by countries such India and Malaysia even 20 years before then.

The most striking link among these countries and the rising Latin American stars of Brazil and Colombia is that their governments have largely stabilised their respective economic policies, making them more attractive to investors and able to maintain the cycle of growth.

What are the prospects for Europe’s developed economies?

In Europe, the UK is predicted to hold its own and grow slowly but steadily, averaging 2.2% between 2040-50. This would place it at number six, below the familiar faces of China, USA, India, Japan and Germany.

But it’s also the size of the working-age population that will influence the balance of power worldwide. While the biggest gainers in 40 years’ time will include Saudi Arabia and Egypt, the smaller but richer European countries have rapidly ageing populations. It’s not hard, therefore, to see why the clout of the Netherlands, Switzerland, Belgium, Austria and the Nordic countries will be significantly reduced.

What could change the course of events?

Of course, nothing is set in stone when it comes to the economy. While the shift in influence to the emerging economies is a pretty safe bet, 40 years is a long time in which to rule out conflict, famine, food, energy and natural resource shortages.

The report is careful to put these in perspective. ‘Rare earth’ materials – said to be the key to the future of global electronics – are anything but rare, with some 99 million tonnes of reserves worldwide according to the US Department of Energy.

As for energy, a low-carbon strategy by the world’s biggest economies should ensure that diminishing oil reserves do not slow the pace of growth.

The picture admittedly shows a bright view of the future, assuming that increasingly stable governments continue to make far-sighted economic decisions in the interests of encouraging world trade. Either way, there’s a more than compelling case for companies to plan their growth around this scenario.

You can read HSBC’s report, The World in 2050: Quantifying the Shift in the Global Economy, here.