Economy : Developing countries set to account for nearly 60% of world GDP by 2030, according to new

estimates

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16/06/2010 - The rapid growth of emerging economies has led to a shift in economic power: forecasts
based on analysis by late economist Angus Maddison suggest that the aggregate economic weight of
developing and emerging economies is about to surpass that of the countries that currently make up the
advanced world.

According to Perspectives on Global Development: Shifting Wealth, a new publication from the OECD
Development Centre, the economic and financial crisis is accelerating this longer-term structural
transformation in the global economy. Longer-term forecasts suggest that today’s developing and
emerging countries are likely to account for nearly 60% of world GDP by 2030.

Figure 1 - Share of the global economy in purchasing power parity terms

While the 1990s was a lost decade for much of the developing world, growth rates picked up significantly
in the 2000s, with the number of developing countries beginning to converge strongly with the affluent
OECD countries leaping from 12 to 65 (Figure 2). The strong performance of China and India has had a
significant impact on the rest of the developing world.

Responding to this trend, the OECD has set out to strengthen its relations with major emerging
economies. It has strengthened its links with Brazil, China, India, Indonesia and South Africa and recently
welcomed Chile as its 31st member and it has extended invitations to join to Estonia, Israel and Slovenia.
Russia is also negotiating to become a member.

What does the rise of large developing countries mean for development?

In converging countries
Since 1990, the number of people in the world living on less than a dollar-a-day has fallen by over one
quarter - approximately 500 million. So far, however, these reductions have mainly been concentrated in
one country – China. Other countries have made progress but at a pace insufficient to counter the effect
of population growth. Poverty reduction still represents a major challenge for the developing world.
Inequality in many rapidly growing developing economies has also been increasing.

"Thanks to the rapid growth rates in emerging economies, their governments can now afford to boost
public spending on social protection. This is a powerful tool to reduce inequality." said Angel Gurría,
Secretary-General of the OECD (read the full speech). "Investing in social infrastructure may also
contribute to diminish the propensity to save of these economies, contributing to a more balanced global
economy." he added.

In poor and struggling countries

Due to their rapid growth and sheer size, India and China influence the key macroeconomic variables that
matter for poor countries: interest rates, the price of raw materials, and wage levels for low-skill jobs.
They also have major impacts on global trading and investment patterns.

Poor and struggling countries will need national development strategies which respond to these global
trends to ensure that they thrive in a global economy in which China and India have greater weight. The
report finds that more could be made of the economic ties between developing countries. "South-South
links" in trade, aid and investment are an increasingly important source of knowledge and finance for
development. For example, lowering tariffs on trade between developing nations to the levels that
prevail between northern countries would be worth almost double the gains achievable by a similar
reduction on North-South trade.

Figure 3 - Potential gains from South-South trade liberalisation

Overall, shifting wealth is good news for development and good news for the global economy. "Growth
in the developing world is an opportunity for the global economy to shift up a gear, which is confirmed
by the role some emerging economies are playing in the current economic recovery", Mr. Gurría
commented.