19/5/11 - World Bank: A new world order emerging

May 19, 2011
MANILA:  Emerging economies in the Asia Pacific region would continue to post growth rates that would exceed those of the developed countries, making it possible for the world’s total production being equally divided among the rich and the emerging markets by 2025.

It was among the highlights of the latest report of the World Bank, entitled “Global Development Horizons 2011–Multi-polarity: The New Global Economy”, reports Yonhap news agency Thursday.

The report forecasted that emerging economies could grow by an average of 4.7 percent this year until 2025, while the industrialised nations are only projected to expand by an average of 2.3 percent. Because of this, the developing economies will eventually catch up with the rich nations in terms of contributions to global output, the report added.

“One of the most visible outcomes of this transformation is the rise of a number of dynamic emerging market countries to the helm of the global economy,” the World Bank said.
The World Bank noted that emerging markets now account for two- thirds of the world’s foreign exchange reserves–a reversal of the picture of the previous decade when industrialized countries owned the bulk of the reserves.

China has the biggest share of the global reserves among emerging markets at US$3 trillion.
“In short, a new world order with a more diffused distribution of economic power is emerging–thus the shift toward multi- polarity,” the World Bank report.

The rising role of emerging markets would eventually diminish the primacy of the US dollar in international trade and finance. Eventually, countries would keep almost equal shares of the US dollar, the euro and the renminbi in their foreign exchange reserves, the bank added.

“Over the next decade or so, China’s size and the rapid globalization of its corporations and banks will likely mean a more important role for the renminbi. The most likely global currency scenario in 2025 will be a multi-currency systm centered around the dollar, the euro, and the renminbi,” the report said.
After the worst global financial crisis, which peaked in 2009, industrialised nations like the United States and those in Europe have posted only moderate growths, some of them cannot even be sustained, according to some economic analysts.

The United States is battling with its growing debt. Some members of the European Union are also trying to cope with their debt woes.

On the other hand, emerging economies grew significantly last year and are expected this year to again outperform rich countries in terms of growth rates.
The report highlights the diversity of potential emerging economy growth poles, some of which have relied heavily on exports, such as China and South Korea, and others that put more weight on domestic consumption, such as Brazil and Mexico.

With the emergence of a substantial middle class in developing countries and demographic transitions underway in several major East Asian economies, stronger consumption trends are likely to prevail, which in turn can serve as a source of sustained global growth.

“In many big emerging economies, the growing role of domestic demand is already apparent and outsourcing is already under way.

This is important for the least developed countries, which are often reliant on foreign investors and external demand for their growth,” the bank said.

The Philippine government earlier said that the economy grew by 7.3 percent last year. But President Benigno Aquino III said last Wednesday that after all the data have been gathered by the Department of Finance, the country’s economy actually grew by 7.6 percent in 2010.