In a report out today, The World Bank looks both at current economic growth rates and projections for the next 25 years. The report, Global Economics Prospects 2007 says “developing economies are projected to grow by 7.0 percent in 2006,more than twice as fast as high-income countries (3.1 percent), with all developing regions growing by about 5 percent or more.” While these nations have only 22 percent of global GDP they accounted for 38 percent of the increase in global output. And they are expected to increase their share of global output by about 50 percent by 2030.
The report expects the world economy to grow from last year’s $35 trillion to $72 trillion by 2030. And this “is driven more than ever before by strong performance in the developing countries.” Only two decades ago the poor nations provided only 14 percent of wealthy nations’ manufactured imports. Today they provide 40 percent and by 2030 they are projected to provide over 65 percent.
As it was over the last 25 years it is the poor who will benefit the most. “The number of people living on less than $1 a day [in constant dollars] could be cut in half, from 1.1 billion now to 550 million in 2030.” And the number living on less than $2 per day will decline by an estimated 800 million.
This will happen in spite of a growing world population, though growth levels will be much slower than today. The population growth rate, which was around 1.7 percent in the 1980s will decline to 1 percent by 2015 and to 0.7 percent in 2030.
A new middle class will be created in the developing nations. Today 400 million people in the poorer nations are considered to be in the “global middle class” with a purchasing power parity of between $4,000 and $17,000 per capita. By 2030 there will be 1.2 billion.
For the next 25 years the report estimates that developing nations will increase their wealth by an average of 3.1 percent per year, above their average of 2.1 percent for the last 25 years. “That rate of increase will produce average per capita incomes [constant dollars adjusted for purchasing power parity] in the developing world of $11,000 by 2030, compared with $4,800 today, roughly the level of the Czech Republic and the Slovak Republic today.”
The net result is that the income of developing countries “will continue to converge with those of wealthy countries. This would imply that countries as diverse as China, Mexico and Turkey would have average living standards roughly comparable to Spain today.”
As good as this is the Bank says things could be even better. They believe their projections “are fairly impervious to all but the most severe and sustained shocks” but they also admit that “the possibility exists that the world will be even better than envisioned… thanks possibly to unanticipated technological improvements, more innovation in business processes that allow for an acceleration of globalization and widespread adoptions of good policies within countries.”
Their “optimistic” scenario would lead to incomes 45 percent higher than today and a decline of absolute poverty from 20 percent of the world’s population to 4 percent. So many people seem to intentionally look for bad news or invent it. It’s a nice change of pace to find a report from a world body which says that the future is either bright or very bright.