Economic shift in the Post-Colonial World

As global economy faces a downward trend with Recession becoming a major challenge in many of the European economies, many nations are looking for investments from emerging economies of Asia.

International Monetary Fund (IMF) ranks the TOP 10 largest economies by Gross Domestic Product (GDP) in Purchasing Power Parity (PPP) terms in the year 2010 and forecasts changes in economic size by 2020.

Key Points:

1. China will displace USA as the largest economy by 2020.
2. India will displace Japan to be the Third largest economy by 2020.
3. Russia will displace Germany to be the Fifth largest economy.
4. TOP 5 Economies by 2020 will be China, USA, India, Japan & Russia.
5. By 2020, 3 of the Top 5 largest economies in the world, China, India and Japan will be in Asia.

By 2020, the share of emerging economies in the Worlds GDP will dramatically change as China (20%) will emerge as the largest individual contributor followed by USA (16%) and India (7%).

Economic implications of this change would be felt across a wide range of industries.

• China (20%) + India (7%) + Japan (5%) will have a World GDP share of 32%, i.e.BY 2020 1/3^rd of the World’s GDP will be in Asia.

 

• If we include USA(16%)  in this equation, then 48% of the World’s GDP will be concentrated in 4 countries- China, USA, India &  Japan

Economic implications of this shift[i]

1. Demand for Consumer Goods will increase: With a huge population base and rising household incomes, demand for consumer goods and services will rise in this region. The total population of BRIC (Brazil, Russia, India and China) economies in 2010 was 2,856 Million compared to 737 Million in the G-7 (USA, UK, France, Germany, Italy, Canada & Japan), Group of Seven DEVELOPED Nations.

2. Luxury Goods will be in demand. For e.g. in China the Disposable Income (above 10,000 US$) will quadruple from 57.1 Million US $(2010) to 222 Million US $ (2020).

3. Foreign Direct investment will flow towards such countries, as they will offer a large, educated and younger population base.

4. Economies like China and India will also emerge as major Foreign Investors. These two countries are already among the top investors in Africa.

---

[i] http://blog.euromonitor.com/2010/07/special-report-top-10-largest-economies-in-2020.html