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Engines of world growth
In the eyes of many, emerging markets may seem like vast, underdeveloped lands suffering from the symptoms of overpopulation. Yet emerging markets, or EM, actually account for a large portion of the world economy.
GDP Growth
Huge Population & Major Consumers
When emerging markets are mentioned, the first image that may come to mind is a factory churning out goods produced with cheap labor. Often, this would not be far from the truth. However, when emerging markets are considered in aggregate, they have also risen to become a major consumer in the world economy. We see this trend in consumption as one of the key drivers of the long-term growth of emerging markets.
In fact, 87% of the world’s population already lives in emerging market nations, which span 81% of the world’s land area. Together, the two emerging giants, China and India, account for 40% of the world’s population.
Huge Population in Emerging Market
Contribution to World GDP growth
The rate of diffusion of consumer goods in emerging markets is much lower than that of developed markets, in spite of the generally larger populations of the former. However, in recent years, consumption growth in emerging economies has considerably surpassed that of the US and is expected to accelerate further on the back of urbanization, higher incomes and rising middle classes.
Consumption Growth in Emerging Economies & the US
As of 2008, emerging markets accounted for 44% of the world’s gross domestic product (based on purchasing power parity, or PPP), representing an increase of nearly 10% in just 10 years. (source: International Monetary Fund, 2009.12) Furthermore, according to a study by Goldman Sachs, the BRIC economies (Brazil, Russia, India and China) could surpass the combined GDP of the G6 nations by 2040.
Emerging Economies’ PPP Share of World GDP
Emerging markets are already a step ahead of developed nations in terms of economic growth. In spite of the recent economic slowdown seen across the developed regions, the global economy continues to maintain solid growth. Moreover, emerging markets’ contribution to global economic growth continues to expand.
Contribution to World Growth by Region
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