The Economist recently focused on the significance of emerging countries over developed countries – a useful article for the Development Economics part of the Cambridge A2 course. As output in most of the developed world contracts, amidst the pressure of austerity measures, those economies that are less developed or emerging have seen the output increase by approximately 20%. Nevertheless how big are emerging markets relative to the developed world?
As successful emerging economies graduate to developed status the prevalence of the emerging economies is eroded. Therefore to appreciate the true shift in global economic power, The Economist looked at numbers using the IMF’s pre-1977 classification. Developed economies based on 1990 data: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States. Newly industrialised countries such as South Korea count as emerging.
From the graph below you can see that the combined output of emerging countries accounted for 38% of world GDP in 2010 twice its share in 1990. If GDP was measured at purchasing-power parity, emerging economies overtook the developed world in 2008 and are likely to reach 54% of world GDP this year. Other key indicators are:
– in 2010 emerging economies accounted for over 50% of world exports
– in 2010 they accounted for over 47% of world imports – domestic demand up markedly
– they attracted over 50% of world foreign direct investment (FDI).
– they consume 60% of world energy, 65% of copper, 75% of steel, 55% of oil
– they make up 46% of world retail sales, 52% of purchases of new cars, and 82% of mobile-phone subscriptions
But maybe more importantly emerging economies are only responsible for 17% of all outstanding debt – one indicator that you don’t want to at the top. With less debt, a growing middle class and huge potential to lift productivity, emerging economies will become the drivers of global growth.