Shifting Geographical Sources of Global Growth

October 7, 2010

The IMF’s October 2010 World Economic Outlook released in conjunction with this week’s IMF/World Bank meetings in Washington contains useful information for sorting world growth trends over the past two decades.  Growth rates in the table below are expressed in annualized terms, that is percent per annum.  Figures in the right-most column embody IMF growth projections for 2010 and 2011.

GDP, % per annum 1992-01 2002-2007 2008-2011-f
World 3.2% 4.4% 2.8%
Advanced Nations 2.8% 2.5% 0.4%
Developing Ones 3.8% 7.1% 5.5%
United States 3.5% 2.5% 0.6%
Euro Area 2.1% 1.9% -0.1%
Japan 0.9% 1.8% -0.6%
China 10.3% 11.2% 9.7%
India 5.7% 8.1% 7.5%


Developing and emerging markets as a whole grew faster than advanced economies in each time segment of the table, and the growth gap between the two groups widened progressively.  Advanced economies expanded 0.3 percentage points more slowly on an annualized basis in 2002-07 than in 1992-01, whereas other nations experienced a 3.3 percentage point quickening in growth between those two periods.  A 2.1 percentage point additional slowdown in advanced economy growth between our second and third sequential periods was about 40% greater than the 1.5 percentage point slowdown in economies other than advanced ones.  The world was truly in recession in calendar 2009, recording negative growth of 0.6% for the year.  Advanced, developed and emerging economies were each impacted, but growth decelerated by more in advanced economies.

The table then isolates three important economies in the advanced nation group and two key members of the developing nation groups. A case for a softer dollar can be observed in that the United States had a more intense compression of its economic growth rate over the entire period than either Euroland or Japan.  Such slowed by 2.9 percentage points between 1992-01 and 2008-11.  Growth in the euro area, by comparison, decelerated by 2.2 percentage points from 2.1% per annum in 1992-01 to minus 0.1% per annum in the current period.  Japan, unlike the United States or Euroland, was mired in minuscule growth in the 1990s, but its growth rate doubled to 1.8% per annum in our middle period, 2002-2007, a part of which coincided with the stewardship of the upbeat former Prime Minister Koizumi.  As a consequence, the slowdown in Japanese growth between 1992-01 and 2008-11 of 1.5 percentage points was less than those experience in either the United States or the euro area even though Japan has suffered most severely in the current era.

China and India, the largest and third largest Asian economies got that way by expanding faster than developing/emerging economies as a whole in all three periods shown above.  China’s advantage versus India moreover diminished sequentially over over three periods.  The 2.4 percentage point quickening of Indian growth from 5.7% per annum to 8.1% per annum between the first and second periods was more than 2.5 times greater than the comparable acceleration of growth in China.  And whereas GDP  in China is likely to grow 1.5 percentage points more slowly in 2008-11 than in 2002-07, India’s growth rate appears likely to drop back by only 0.6 percentage points.  Fittingly, the cover story in the latest issue of The Economist is “How India’s Growth Will Outpace China’s.”

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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