... given that world gross domestic product [GDP] is predicted to grow 3.2% in 2012, accelerating to 3.5% between 2013-2016. Beyond which period, growth is projected to average a meagre 2.7% from 2017-2025. Each period’s projected pace is less than the 3.6% average during the 1996-2005 period that preceded today's ongoing recession.
- Over time, the emergence of larger middle classes in the developing markets will help global businesses to adjust to declining demand among struggling middle-class consumers in the advanced nations.
- Much of the medium-term acceleration will come from the advanced economies, including the US, the Eurozone and Japan. The board projects those developed nations’ growth will pick up from 1.3% in 2012, to 2.0% in the following four years, then ease to 1.9% from 2017 to 2025.
- Emerging nations, led by China and India, are set to slow, with total GDP seen rising 5.1% in 2012, 4.9% from 2013-2016 and 3.4% after that.
When the board’s economists ran the global forecast, the biggest surprise was the throttling back in China’s growth rate, said Bart van Ark, the board’s chief economist.
China is expected to expand 8.7% next year, 6.6% in the following four years and only 3.5% in the 2017-2025 period.
Of course, the 3.5% rate will be based on a much larger GDP level. The board expects China to overtake the US as the globe's largest economy by about 2015 on a purchasing-power-parity basis.
“China must transform itself from an export-driven economy to one more geared toward domestic, consumer-based demand,” said van Ark. That shift, along with slower population growth, will account for most of China’s deceleration.
The global output slowdown will result in smaller gains in per-capita income that bring risks to both the advanced and developing worlds, the report warned.
For the advanced economies, believes van Ark, “slower income growth will leave less money available to finance health-care and pension programs."
The US and the Eurozone have already had to confront unsustainable trends in fiscal entitlements programs. Slower income growth would leave even smaller revenue sources.
For emerging markets, per-capita income growth will likely be unevenly distributed, with some nations seeing per-capita income growth of only 1%, a rate too low to improve living standards.
Factual data only is sourced from the original attributed article. The data is then enhanced by additional research and comment.