Asia’s economies on track to lead the world
FIVE years after the beginning of the financial crisis, the world is moving towards the ‘Asian Century’ at a greater speed than could have been imagined 10 years ago.
The crisis in the West - a catalyst for Asia’s economic rise - has happened as Asia commands an increasingly dominant share of the world’s population.
In the aftermath of the financial crisis, China overtook Japan as the world’s second biggest economy, and Germany as the world’s biggest exporter.
But there was another milestone for Asia in 2012. According to International Monetary Fund (IMF) data, Asia’s developing nations, including China and India, overtook the eurozone in percentage share of the global economy.
Ten years ago the eurozone group accounted for 21 per cent of world GDP. Developing Asian countries accounted for eight per cent. In 2012, Asia’s 27 developing countries made up 18 per cent of the total, compared with 17 per cent for the eurozone.
The share of Asia’s 27 developing countries had more than doubled in 10 years, growing at a compound annual rate of 8.4 per cent.
Asia’s share of world GDP is expected to reach 22 per cent by 2017, according to the IMF. China alone will have 14.3 per cent, almost matching the GDP of the entire eurozone.
By 2025, four of the 10 largest economies in the world will be in Asia, with China taking second, or possibly first, place. The other three are India, Japan and, Indonesia.
Asia is likely to account for almost half of the world’s economic output by then, with China accounting for about half .
Fast growing Asian economies will be the engines of world economic growth as their share of global output keeps rising.
Asia accounted for approximately 45 per cent of world GDP growth in 2005. This figure is expected to rise above 50 per cent by 2015 and above 60 per cent by 2025.
Asia’s contribution to world output will largely be the result of sustained growth by China and India. Indonesia, Malaysia and other countries in Southeast Asia have smaller sized economies but are also expected to grow rapidly and make solid contributions to regional growth.
Unlike Asia’s developing countries, the continent’s most advanced major economies, Japan and South Korea, are expected to grow at more moderate rates.
Both countries are suffering from unfavourable demographics, extremely low fertility, especially in the large cities where the young and dynamic tend to live, a rapidly ageing population, shrinking labour forces and widespread opposition to immigration.
There are three key drivers of Asia’s economic growth: productivity, urbanisation, and the value system.
Many emerging Asian economies are starting from a low level of productivity, so the potential for continued labour productivity growth is large. Output per person in China is only 20 per cent of that in the United States, while India and Indonesia have barely reached 10 per cent.
High levels of capital investment have supported labour productivity growth in the region.
Human civilisation reached a turning point in 2007, the year when, for the first time, more than 50 per cent of the world’s population was recorded as living in cities or towns.
The rapid urbanisation trend is set to continue. By 2050 the share of the world’s population living in urban areas is expected to increase to 70 per cent - 6.5 billion people.
Most of the urban growth will occur in the developing world, especially in Asia. By 2025 seven of the world’s 10 largest megacities will be located in Asia, according to the United Nations.
The ambitious and dynamic among the young population in Southeast Asia’s emerging countries have been moving from rural areas to the megacities for better education and job opportunities and for marriage markets.