A DRAMATICALLY DIFFERENT WORLD By 2050, only India would be recording growth rates significantly above 3%.. BREAKING DOWN GROWTH Growth accounting divides GDP growth into three componen
Trang 12 A DRAMATICALLY DIFFERENT WORLD
By 2050, only India would be recording growth rates significantly above 3%
By 2025, the BRICs economies could account for over half the size of G6
In <40 years, the BRICs economies together could be larger than the G6 in U.S $ terms
The annual in U.S $ spending from the BRICs could be twice that of G6 by 2025 & four time higher by 2050
Only Russia will catch up with the G6 in terms
of income per capita by 2050
Demographic impacts vary greatly
Decline in working age population will be steeper in Russia & China than India &
Brazil
Currency Movements
Currency appreciation may contribute about 1/3 of the in U.S $ GDP from the BRICs
BRICs real exchange rates could appreciate by
up to 300% over the next 50 years
3 HOW COUNTRIES GET RICHER
Developing economies grow faster than developed economies due to following two reasons:
Returns on capital are higher (less capital)
May able to use technologies available to developed countries
BRICs economies all have exchange rates that are a long way below PPP rates (their currencies will tend to appreciate)
Trang 24 BREAKING DOWN GROWTH
Growth accounting divides GDP growth into three components
Growth in employment
Growth in capital stock
Technical progress
5 A MORE DETAILED LOOK AT THE BRICs' POTENTIAL
GDP growth rate falls to 5% in 2020 & slows to around 3.5% by the mid 2040
Size of economy will overtake Italy, France, U.K
& Germany
GDP growth rate averages 3.6% over next 50 years
By 2050 the country’s GDP per capita is by far the highest in the group & comparable to G6
Over the next 50 years, India’s growth is expected
to remain above 5%
6 ARE THE RESULTS PLAUSIBLE?
Three ways to cross-check the forecasts made for BRICs
GDP growth forecasts for next t 10 years should be in line with IMF’s assumptions of potential growth in BIRCs
Alternative growth projection & models yield very similar results
Implied changes in currencies & GDP are fewer speculators than what some economies actually achieved
7 A LOOK BACK IN TIME WHAT WOULD WE HAVE SAID IN 1960’s
In developed countries, the differences b/w projected & actual growth rates are small
In developing countries their output gap is wider
Trang 38 ENSURING THE CONDITIONS FOR GROWTH
To ensure solid growth performance, following conditions should be in place
Stable macroeconomic background & sound macroeconomic policies
Openness
Strong & stable political institutions
High level of education
9 HOW DIFFERENT ASSUMPTIONS WOULD CHANGE THINGS
Important assumptions that, if altered, can significantly affect conclusions:
Catch up ⇒ convergence rate captures a broad range of factors that determine the ability to “catch up”
Investment ⇒ less important, but substantial differences from assumptions would certainly alter the main conclusions
Demographics ⇒ these assumptions may also turn out to be incorrect
10 IMPLICATIONS OF THE BRICs' ASCENDANCY
If the BRICs do meet the projections then:
Higher than expected BRICs, growth
Returns & demand for capital
∆ In local spending pattern
Advanced economics will become a shrinking part of the world economy
Regional neighbors of the BRICs could benefit from BRICs growth