While the United States has long led the world in economic growth, other places in the world have experienced exceptional growth in the past thirty years and are expected to continue to keep growing.
China, despite a recent slowdown in its economic growth, is expected to become the world’s largest economy in the near future. According to the National Intelligence Council, China will surpass the US to become the world’s largest economy “a few years before 2030”. Considering their positive trade balance, excess foreign reserves, and low debt, this would represent a major shift in economic power. Frost and Sullivan predict that China is set to become the largest economy in the world by 2025 with a real GDP of $38 trillion. Between 2010 and 2020, China’s average annual growth rate is expected to be 9.5% (Euromonitor International).
In the 1990’s it was predicted that the 21st century would be the Pacific Century. In 2000, China accounted for only 7.1% of the world’s GDP, but by 2025 the combined GDP of China and India will be greater than that of the G7, France, Germany, Italy, Japan, the UK, the US, and Canada combined (OECD). China’s economy has grown 7 times as fast as the US over the past decade. And, while China was long adulated for its cheap labor force, it is now expected to become the world’s largest market. Consumer spending is up more than 23% year over year from 2010 to 2011. This compares to 3% in the US and the trend is expected to continue.
A region that is frequently ignored by the US media is Africa. Africa’s population is expected to double by mid-century and has become recognized as the world’s fastest growing continent (the Atlantic). Long associated with instability, Africa is now a more stable region. “Back in the 1970’s, around two-thirds of the countries on the continent were considered to be at war. Now, there are probably only three countries in that state” (Oliver Bell). According to the IMF, the continent will be the fastest growing region in the world for the next five years. Trade between Africa and the rest of the world has increased by 200% between 2000 and 2011. A report from the African Development Bank projects that by 2030, consumer spending will increase from $680 billion to $2.2 trillion. In 2013, the continent’s income is projected to increase by about 4.5%. And, Africa is the only region in the world where economic growth rates are increasing. According to the Institute for International Finance, by 2020, African GDP will hit $2.6 trillion. Many countries are taking advantage of this exceptional growth. China, for instance, allocates one-third of its foreign investment to Africa.
Even Europe is not what it seems to be. While facing a debt crisis, Europe is now getting its head out of the hole. European countries are facing the crisis together, something many Europeans still maintain will never happen. Europe has adopted a series of measures to get out of this crisis and to prevent others. While the European Central Bank is buying back bad debt, the periphery States have agreed to new budget discipline measures. Europe is slowly but surely getting out of the crisis.
The economic trends of the world are changing. Exceptional growth is expected in the East and the South, while slower growth is expected in the North and West. Make sure your portfolio is allocated to take advantage of this changing world.
Co-Authored by Erich Schwerd & Gnonle Ouattara.
Case Study 3
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