The spectacular growth of emerging economies led by China in the past decade or so has dramatically altered the global economic power equations. The sub-prime meltdown and the resultant Great Recession have only accelerated this trend. The Economist has two graphics that captures the essence of this shift.
Whereas the real GDP in most developed economies is still below its end-2007 level, the same has risen more than 20% for emerging economies. This has hastened the process of convergence between the shares of the two parts of the world economy.
The rapid rise of emerging economies since 1990 has seen them close in on the developed economies in their respective global shares across a range of parameters.
If GDP is measured at purchasing-power parity, emerging economies overtook the developed world in 2008 and are likely to reach 54% of world GDP this year. Further, they accounted for three-quarters of global real GDP growth over the past decade. Though they consume 60% of the world’s energy, 65% of all copper and 75% of all steel, given the low per capital consumption, there is plenty of room for even more growth.
At a time when public debt is the biggest macroeconomic concern, emerging economies are responsible for only 17% of all outstanding government debt. The long-term outlook for these economies over the coming years appears bright, with less debt, more favourable demography and huge potential to lift productivity, besides considerable room for further growth.