Jim O’Neill, the chairman of Goldman Sachs Asset Management, made some interesting comments regarding the sources of growth for the global economy over the next decade in a recent Viewpoint article (http://bit.ly/U1T2KE).
“…to emphasize the relative importance of regions for just this second decade of the century, let me repeat something key from our economic assumptions that I occasionally refer to. We are assuming that the eight economies we define as “Growth Economies” – Brazil, Russia, India, China, Indonesia, South Korea, Mexico and Turkey – will contribute around $15 trillion in real terms to the world this decade. This contribution will allow for faster, yes faster global GDP growth of around 4.2% than for each of the past three decades. Of this $15 trillion, one-half will come from China, and another quarter of the total will come from the other Asian Growth Economies. This $15 trillion total will be more than twice that of Europe and the US combined. The Next 11 (N-11) economies, which as well as including South Korea and Indonesia, include another four Asian economies – Bangladesh, Pakistan, the Philippines and Vietnam – will contribute nearly as much as the G7 and more than either the US or Europe.”
So Goldman Sachs is assuming greater growth overall this decade for the world’s economy than for any of the last three decades. This is particularly positive when investors consider the whereabouts of those areas of major growth as over half of total growth will come out of Asia. This ought to be structurally supportive for economies such as New Zealand and Australia who are geographically close and have goods and services which those economies should demand.