"By 2025, six major emerging economies will account for more than half of all global growth, and the international monetary system will likely no longer be dominated by a single currency," the Washington-based World Bank said in a press release Wednesday, quoting its latest report on "Global Development Horizons 2011 - Multipolarity: The New Global Economy".
As economic power shifts, these successful economies will help drive growth in lower income countries through cross-border commercial and financial transactions.
The report projects that as a group, emerging economies will grow on average by 4.7 percent a year between 2011 and 2025.
Advanced economies, meanwhile, are forecast to grow by 2.3 percent over the same period, yet will remain prominent in the global economy, with the euro area, Japan, the United Kingdom, and the United States all playing a core role in fueling global growth.
"The fast rise of emerging economies has driven a shift whereby the centers of economic growth are distributed across developed and developing economies - it`s a truly multipolar world," said Justin Yifu Lin, the World Bank`s chief economist and senior vice president for development economics.
"Emerging market multinationals are becoming a force in reshaping global industry, with rapidly expanding South-South investment and FDI inflows. International financial institutions need to adapt fast to keep up," he said.
To sustain growth and cope with more complex risks, economies that are home to emerging growth poles need to reform domestic their institutions, including in the economic, financial, and social sectors. China, Indonesia, India, and Russia all face institutional and governance challenges.
Human capital and ensuring access to education is a concern in some potential growth poles, particularly Brazil, India, and Indonesia.
According to the report, emerging economies that used to rely on technological adaptation and external demand to grow will have to make structural changes to sustain their growth momentum through productivity gains and robust domestic demand.
Global Development Horizons maps out the challenges that a multipolar world economy poses for developing countries over the next twenty years.
The authors use empirically-based indices to identify high-growth countries with strong human capital and technological innovation, and that also drive economic activity in other countries. Growth spillovers are likely via cross-border trade, finance, and migration, which will induce technological transfer, and increase demand for exports.
The report highlights the diversity of potential emerging economy growth poles, some of which have relied heavily on exports, such as China and Korea, and others that put more weight on domestic consumption, such as Brazil and Mexico. (tx.f001/A/HAJM) (*)
Editor: Ella Syafputri
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