Thursday, August 29, 2013

Combined wealth of developing countries overtakes the rich world for the first time ever

  • Emerging economies are worth a total of $44.4trillion adjusted for purchasing power, compared to $42.8trillion for the rich world
  • But developed countries are still far richer per capita
By Hugo Gye
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The world's developing economies are now larger than those of developed countries for the first time ever, it has emerged.
As poorer countries' economies continue to grow, they have between them overtaken richer economies which are held back by sluggish growth.
The total size of emerging economies this year is projected to be $44.4trillion, compared to $42.8trillion for the rich world.

Revolution: The economic power of emerging economies has overtaken that of the rich world
Revolution: The economic power of emerging economies has overtaken that of the rich world

The figures, compiled by the International Monetary Fund and published by Quartz, are calculated on the basis of purchasing-power parity (PPP), which takes account of the fact that goods and services are cheaper in poorer countries.
'Advanced economies' are defined as the U.S., western Europe, Japan, Canada, Australia, New Zealand plus the four 'Asian Tigers' - South Korea, Taiwan, Hong Kong and Singapore.

These nations account for less that 20 per cent of global population, with the vast majority of people living in one of the other 150 countries.
Nonetheless, ever since the dawn of the modern era this small group of countries has consistently held more economic firepower than the majority.
However, this is set to change this year, the IMF data suggest, as the rich world continues to suffer thanks to the global economic crisis.

Contrast: Developed countries are still far richer when you compared GDP on a per capita basis
Contrast: Developed countries are still far richer when you compared GDP on a per capita basis 

Developed economies experienced a sharp recession following the financial crash in 2008, and have grown slowly ever since.
Poorer countries, by contrast, saw a much less serious slowdown, followed by a resumption of runaway growth rates.
The effect of the crisis is shown even more vividly if you strip out the U.S. and China, the largest rich and poor countries respectively, from the figures.
Excluding the world's two giants, emerging economies became larger than developed ones in 2009, the year that recession struck the rich world.

Growth: The rich world has been held back by the recession which followed the global financial crisis
Growth: The rich world has been held back by the recession which followed the global financial crisis

The gap is only set to widen over the next few years, as developing countries are forecast to keep up strong growth rates despite China's recent economic stumbles.
However, advanced economies remain far richer than emerging ones when it comes to GDP per person.
Adjusted for PPP, developed countries have a GDP of $41,369 per capita, compared to just $7,415 for emerging economies.
And if you look at unadjusted GDP, the rich world still has more economic heft than poor countries, at a total $45trillion against $29.1trillion.

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