The potential for growth in Turkey, India, Brazil, Indonesia, and Mexico looks far stronger. All these countries are democratic, have developed strong entrepreneurial cultures, will have continued strong growth in their labor forces, and have great potential to increase education levels. Of course, they face obstacles as well. Turkey risks running aground over internal conflicts regarding the rights of its Kurdish minority, which forms about 20 percent of its population, and issues of press freedom. India faces threats of Hindu-Muslim strife, widespread rural uprisings in the northeast, vast inequalities among regions, and entrenched local corruption. Brazil faces daunting inequality, both between its poorer north and more developed south and within its vast cities. Indonesia must resolve long-simmering regional conflicts, and parts of Mexico are close to being overwhelmed by drug violence. Despite these problems, however, these countries have all turned in strong growth performances over the last decade. Additionally, unlike China and Russia, they have demography and freedom -- a powerful combination -- on their side.
The current obsession with how soon China's economy will overtake that of the United States is absurd. IMF estimates for 2010 place China's GDP at about 40 percent of U.S. GDP. If China's growth rate slows to 5 percent per year from 2010 to 2030, as seems highly likely given the demographic and other obstacles it faces, and the U.S. economy grows at 2.5 percent per year, then in real terms, China's economy will only grow from slightly more than one-third as large as the U.S. economy today to two-thirds as large in 2030. With its workforce plunging (and aging), there is no reason to expect China's relative gains to continue after that date. Even if those growth rates continue, though, China's economy would not catch up with the U.S. economy until after 2050.
The real story of emerging-market growth will occur in the TIMBIs, which will markedly shift their positions in the world economy. The chart below shows the trajectory for the TIMBIs (solid lines) compared with other leading economies (dashed lines). This projection assumes growth rates of 5 percent per year in the TIMBIs and 1.5 percent for Britain, France, Germany, Italy, Russia, and Spain -- all countries where the labor force will be rapidly aging and stagnating or shrinking after 2010. (Note that from 1995 to 2005, the annual rate of productivity growth in Western European countries averaged 1.4 percent and that these countries face substantial austerity cuts and demographic reversals in the immediate future. Thus this prediction may even be optimistic.)
Projected Growth Trends, TIMBI and other countries, 2010-2030
(GDP in Billions* of Real 2000 U.S. Dollars)
The big story here is Brazil, which is projected to overtake Germany around 2025, becoming the world's fourth-largest economy (after the United States, China, and Japan). India will overtake Italy and Britain by 2020 and surpass France and nearly equal Germany in output by 2030, becoming the world's sixth-largest economy. Mexico will overtake Spain and Russia by 2020 and catch up to Italy by 2030. And Indonesia and Turkey will essentially catch up to Russia and Spain, going from less than half their size in 2010 to near equality in 2030.
SUBJECTS:
(33)
HIDE COMMENTS LOGIN OR REGISTER REPORT ABUSE