LONDON: The Philippines and Peru will be among emerging economies that become much more prominent in the next few decades, helped by demographics and rising education standards, with the Philippines set to leapfrog 27 places to become the 16th largest economy by 2050, HSBC predicts.
The bank expects China to overtake the United States as the world's biggest economy by 2050, and says strong growth rates in other developing countries will help drive the global economy.
"Plenty of places in the world look set to deliver very strong rates of growth. But they are not in the developed world, which faces both structural and cyclical headwinds. They are in the emerging world," the bank said in its report 'The World in 2050'.
It based its forecasts on fundamentals such as current income per capita, rule of law, democracy, education levels and demographic change.
HSBC projects the Philippines economy is poised to grow by an average of 7 percent annually over the next 40 years, while Peru should average annual growth of 5.5 percent over the same period.
The sheer pace of population growth in countries such as Nigeria and Pakistan means that these economies will swell in size to be included among the 100 biggest economies even if their incomes on a per-capita basis remain low.
HSBC said lower scores for rule of law in Latin America constrained its per-capita income projections for the region though it noted that Brazil was making headway in this aspect.
"The losers are the small population, ageing economies of Europe," added the bank, which says the demographics in much of Europe underscores concerns about the debt problems faced by many of the continent's governments.
'COPY AND PASTE' If sufficiently open to modern technology, developing countries could enjoy many years of robust GDP growth
although they could struggle for growth drivers once they have adapted to technological advances, HSBC said.
"The initial years of development could be described as 'copy and paste' growth, as countries open themselves up and adapt to the world's existing technologies. Once the 'copy and paste' growth is complete ... many economies struggle and get stuck in what is often known as the middle-income trap."
"But many of the countries we are considering are still at such an extremely low level of development that there are years of this 'copy and paste' growth ahead," it added.
It was here that many of the pessimism about China was misplaced, the bank argued.
"One of the most commonly cited reasons for concern about China is the high rate of investment as a percentage of GDP ...(But) we believe the strong rate of investment is entirely justified - providing China with much needed basic infrastructure," it said.
The bank said high levels of education in central and eastern Europe meant that the region could enjoy strong income per capita growth in the coming years before weak demographics eventually sap economic growth.
"While education rates are similar (to the West), the average income per capita in the central and Eastern Europe block is just one fifth that of the developed world. For this reason ... economies have great scope to catch up in income per capita," it said.
"Some of the smaller Eastern European countries - Romania, the Czech Republic and Serbia - (should) all do extremely well, particularly in the coming decade, before demographics prove to be more of a drag."
Source: From the Economic Times
