Emerging markets now make up more than 50 per cent of the world’s GDP - a fact many missed this week, and Ashmore’s head of research Jan Dehn flags up today.
A lot of people paid attention to the fact that China is about to surpass the US as the world’s biggest economy (by one particular World Bank measure), which is actually something that the country’s statistical bureau disagrees with.
Fewer noticed that a second International Monetary Fund (IMF) report showed that emerging market economies now make up 50.4 per cent of the world’s aggregate GDP for the first time. In the April report last year, they made up 49.9 per cent.
Of course, this does not mean the world is now balanced - 85.1 per cent of the world’s population live in these developing and emerging economies. But it’s still a story that is sometimes ignored - while national inequality in different countries may or may not be rising in different countries, it’s falling around the world generally, as the World Bank notes.
In 1981, these developing economies made up less than a third of world GDP - and as recently as 2007 the IMF said the emerging economies made up only 43.6 per cent. Though emerging market (EM) growth rates have also been trimmed since the financial crisis, the slump and slow growth since 2008 have had an impact on the rate of change. Jan Dehn adds that the IMF expects this to increase at a speedier pace:
“This means that EM has increased its share of global GDP by an average of 0.6 per cent per year over the past 33 years. Interestingly, the IMF expects EM share of global GDP to increase at an ever faster pace going forward. According to its forecasts, EM’s share of global GDP will grow by an average of 0.7 per cent per year from now until 2019 to reach 54.5 per cent.”
The change so far has been driven largely by the rapid growth in developing Asia, which now makes up 25.9 per cent of world GDP, up from 20.1 per cent six years ago. That increase mostly comes from China, with a share rising from 10.8 to 15.4 per cent in the same period.