The world economy will start growing again in 2010 but emerging markets will accelerate at a much faster rate than the U.S and Europe, due in part to continued frugality among Western consumers, a new report says.
Developing countries in Asia and Latin America will account for the majority of global economic growth over the next decade, according to the New York-based research group The Conference Board, which puts out the closely watched Consumer Confidence Index. And while China will be an important part of the unwinding of the global financial crisis, its growth rate may be overtaken by nations such as India as China's export-driven economy matures and shifts toward domestic consumption.
In a new annual forecast released Monday The Conference Board says world gross domestic product, a measure of overall economic performance, will grow 3.5 percent next year and ramp up to more than 4 percent in 2011.
The group predicts global GDP could accelerate to 4.2 percent from 2011 to 2016. That would be just shy of the 4.3 percent growth the global economy averaged from 2000 to 2008, marking an impressive recovery after one of the worst financial meltdowns of the last century.
But it will also signal a shift in how economic growth is distributed around the globe.
Developing countries will make up as much as two-thirds of global GDP by 2016, up from 52 percent today and a complete reversal from a decade ago, the report says. While GDP in the developed world will grow at an average of about 1.5 percent from 2011 to 2016, GDP in developing countries will speed ahead at 5.8 percent, the group forecasts.
Europe and Japan are likely to recover slower than the U.S. in the near-term, due to remaining structural problems in their domestic markets and as the dollar's weakness relative to the euro and yen make their exports more expensive.
The U.S. is likely to see growth moderate from historical standards as consumers spend less and save more, a trend already playing out as retailers head into the crucial holiday season. The group said that along with a greater savings rate, a fundamental transformation in demand may take place, as Americans shift toward smaller houses and more durable environmentally friendly goods.
The Conference Board's Consumer Confidence Index, showed only a small uptick from October to November, held down by lingering concern over layoffs. It's an important gauge for the U.S. because consumer spending on goods and services accounts for more than 70 percent of the nation's economic activity.
It could also have implications for China, which relies heavily on exports to the U.S. and other advanced economies. The report projects China's economic growth at 8.5 percent for 2010, slowing to 7.5 percent after 2011. India's growth rate, meanwhile, is forecast slightly higher at 8 percent from 2011 to 2016.
Overall, the report sees little danger from inflation in the near term.
Global demand has fallen sharply over the past two years, leaving an oversupply of production capacity _ idle manufacturing equipment and unemployed or underemployed workers. The report says it will take several years until demand rises to the level necessary to tighten up the slack, which means prices should stay relatively stable.