structural transformation of the global economy implications of global power shifts
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Structural Transformation of the Global Economy Implications of Global Power Shifts. Amar Bhattacharya G-24 Secretariat Eurodad/Glopolis International Conference Prague, June 4, 2013. Overview. Structural transformation in the global economy Implications of changing power dynamics. - PowerPoint PPT PresentationTRANSCRIPT
Structural Transformation of the Global Economy
Implications of Global Power Shifts
Amar BhattacharyaG-24 Secretariat
Eurodad/Glopolis International ConferencePrague, June 4, 2013
Overview
1. Structural transformation in the global economy
2. Implications of changing power dynamics
2
Overview
1. Structural transformation in the global economy
2. Implications of changing power dynamics
3
Structural Transformation World Economy at a point of structural transformation
in the relationship and position between developed and developing countries
Change has been highlighted and accentuated by the crisis but had started well before
For almost 60 years developing country growth tracked that of developed countries and with depreciating countries led to growing divergence
During the past decade there has been a structural decoupling even though there are strong cyclical links
4
Growth in EMDCs has consistently outpaced AEs for decades
5Source: G-24 calculations based on data from World Economic Outlook, IMF and World Development Indicators, World Bank
This trend is evident in G-24 countries, especially when GDP is weighted
6
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
G-24 Simple AverageHigh Inc. OECD - GDP WeightedG-24 GDP Weighted
Per-Capita GDP Growth 1960-2012
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
G-24 Simple AverageHigh Inc. OECD -GDP WeightedG-24 GDP Weighted
Per-Capita GDP Growth Trend 1960-2012(Hodrick-Prescott Filter)
Source: Canuto (2013), World Bank Poverty Reduction and Economic Management Department
Structural Transformation Not a story of China and India or of a few emerging markets and
developing countries Prior to crisis, 94 EMDCs recorded growth in excess of 5 percent
per annum and 90 percent of EMDCs grew faster than the average of AEs
Trend will be continued; although average growth of both AEs and EMDCs lower than before the crisis, differential will be sustained
Particularly striking that low income countries and SSA are part of this trend
Underpinning this impressive growth has been a virtuous cycle of rising savings and investment, growing trade and macroeconomic resilience
7
8
2003-2008
2009-2012
2013-2015
2003-2008
2009-2012
2013-2015
2003-2008
2009-2012
2013-2015
<2.5% 2.5-5% >5%
0
10
20
30
40
50
60
70
80
90
100
1423 21
112 4 0 0 0
19
56
3345
5863
94
44
62
Num
ber o
f cou
ntrie
s
Advanced Economies EMDCs
Increasing Number of EMDCs are on path to convergence
Dispersion of Average Growth
<2.5% 2.5-5% >5%
Source: G-24 calculations based on data from World Economic Outlook Database April 2013, IMF.
9
Income groups are gradually converging
0
20
40
60
80
100
120
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Number of HIC countries Number of MICs Number of LICs
Structural Transformation Sustained growth differential between AEs and
EMDCs leading to a profound change in the global economic landscape with the share of EMDCs in the global economy measured in PPP terms greater than that of AEs
Similar trend between the G7 and the BRICS reflecting a new rebalancing of power
Convergence between GDP at market prices and GDP PPP in contrast to the pre-2000 an important element of the new story of convergence
10
Share of GDP (Market Prices) Share of GDP (PPP)
11Source: G-24 calculations based on data from World Economic Outlook Database, IMF
1980 1990 2000 2005 2010 20150
10
20
30
40
50
60
70
80
90
100
1980 1990 2000 2005 2010 20150
10
20
30
40
50
60
70
80
90
100
Advanced Economies EMDCs
EMDCs account for increasingly large shares of global GDP
Share of GDP (Market Prices)
1980 1990 2000 2010 20150
10
20
30
40
50
60
70
Perc
ent
Share of GDP (PPP)
1980 1990 2000 2010 20150
10
20
30
40
50
60
70
Perc
ent
12Source: G-24 calculations based on data from World Economic Outlook Database, IMF
G7 BRICS
EMDCs account for increasingly large shares of global GDP
Growing Convergence Between GDP at Market Prices and GDP PPP
(Share of EMDCs in Global GDP)
0.00
10.00
20.00
30.00
40.00
50.00
60.00
GDP PPP GDP at Market Price GDP MP w PPP Convergence
13Source: World Economic Outlook, IMF
14
Growth rates in EMDCs have withstood the crisis better than those in AEs
Advanced Economies EMDCs
Source: G-24 calculations based on data from World Economic Outlook, IMF and World Development Indicator, World Bank
GDP
Grow
th
Average 2003-08 Average 2009-12 Average 2013-150.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
Continued, differential growth prospects between EMDCs and AEs are forecast
15
19601963
19661969
19721975
19781981
19841987
19901993
19961999
20022005
20082011
20140
50
100
150
200
250
300
350
400
450
500
Developing countries
Other high-income countries
Euro-area
Real GDP, index 1980=100
Though amongst EMDCs, there is heterogeneity across regions
16
Aver
age
GDP
Grow
th
2003-2008 2009-2012 2013-2015
Source: G-24 calculations based on data from World Economic Outlook, IMF and World Development Indicator, World Bank
EAP ECA LAC MENA South Asia SSA0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Major Challenges to Sustained and Sustainable Growth
Infrastructure development and financing The jobs crisis and prospects for long-term
employment creation Growing income inequality with lagging countries
and growing inequality in both AEs and EMDCs Sustainability including climate impact and
resilience also a source of enormous concern
17
Overview
1. Structural transformation in the global economy
2. Implications of changing power dynamics
18
Implications for Global Governance
19
• Growing interconnectedness poses new challenges in global coordination and governance arrangements
• Recent waves of financial crises has underscored importance of coordination in the economic and financial sphere but also the inherent challenges of such coordination
• The new wave of global challenges coincides with major shifts in relative positions and the role of old and new powers
The global rank of economies has shifted markedly in the last four decades
20
Rank 1980 1990 2000 2015
1 United States 2788 United States 5801 United States 9951 United States 18012
2 Japan 997 Japan 2370 Japan 3256 China 16647
3 Germany 762 Germany 1447 China 3015 India 5930
4 France 537 France 1027 Germany 2144 Japan 5095
5 Italy 509 Italy 976 India 1571 Germany 3497
6United Kingdom 450
United Kingdom 922 France 1532 Russia 2957
7 Brazil 446 China 910United Kingdom 1486 Brazil 2780
8 Mexico 337 Brazil 786 Italy 1404United Kingdom 2572
9 India 286 India 745 Brazil 1234 France 2438
10 Canada 280 Mexico 612 Russia 1121 Mexico 2055
11 Spain 272 Canada 558 Mexico 1065 Italy 1943
12 China 248 Spain 551 Canada 911 Korea 1897
13 Netherlands 150 Korea 336 Spain 900 Canada 1676
14 Poland 150 Australia 306 Korea 776 Indonesia 1549
15 Australia 146 Turkey 291 Australia 525 Spain 1499
GDP (PPP), $Billions
Source: WEO Database, IMF
Contributions to World Growth(percent)
1981 to 1991 1991 to 2001 2001 to 2011 1981 to2011
United States 21.2 26.3 9.6 17.0
Euro Area+ UK 20.6 17.3 6.4 12.6
Japan 11.4 2.4 1.0 3.7
China 8.7 17.9 29.6 21.6
India 4.4 6.5 10.1 7.8
Rest of World 33.8 29.7 43.4 37.3
Source: A. Virmani based on IMF data
IFI governance arrangements have failed to account for changing economic realities
22
Evolution in Actual and Calculated IMF Quotas Relative to Weight in Global Economy
Source: G24 calculations based on IMF data
23
With a Persistent Bias Against Poor Countries
1 Defined as EMDCS whose GDP PPP share divided by the 14th General Review Quota share is greater than 1 and not over-represented by more than 25% based on the current quota formula. 2 PRGT-eligible countries including Zimbabwe. Source: G24 calculations based on IMF data
Trends in GDP PPP and GDP at Market Prices
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2003-2007 2007-2009 2011-2012 2014-2015 2014-2015 compression 0.95
Sub-Saharan Africa
GDP PPP GDP MKT
14th Review Proposed Quota
Pre-Singapore
Source: Calculations based on WEO data 24
Why Europe Needs to Adjust Its Quota and Voting Share in the IMF
Post-2010 Quota Share
2011-2012 GDP Weight1 Calculated Quota2
United States 17.4 20.0 16.1
Japan 6.5 6.7 6.3
Europe excl CIS 32.8 23.7 34.7
Advanced Europe 29.4 21.1 30.8
EMDCs 42.3 48.0 42.3
Poor Countries 2.7 1.6 1.6
1GDP Blend of 40 percent GDP at market exchange rates and 60 percent at GDP PPP2 Based on current formula and 2007-2009 data
Thank you