December 14, 2006	Thursday	Ziqa'ad 22, 1427

WASHINGTON, Dec 13: Developing countries, particularly in Asia, will power the growth in global economy in the next 25 years, the World Bank predicted on Wednesday.By 2030, 1.2-billion people in developing countries will belong to a global middle class, up from 400-million today, says the bank’s report titled, “Global Economic Prospects: Managing the Next Wave of Globalisation.”

The medium-term outlook for the world economy also remains fairly bright. While the pace of economic expansion is slowing, developing economies are projected to grow by 7.0 per cent in 2006, more than twice as fast as high-income countries, 3.1 per cent. All developing regions are growing by about 5 per cent or more this year.

With growth reaching 7 per cent this year, twice as fast as developed countries, developing countries are in the driving seat. Next year, the growth rate for developing countries will dip slightly to 6.4 per cent and to 6.1 per cent in 2008.

In comparison, developed economies would expand by 3.1 per cent this year, slow to 2.4 per cent next year and strengthen to 2.8 per cent in 2008.

"The gap between developing countries and high income countries is widening," World Bank economist Hans Timmer told reporters. "Developing countries are able to accelerate while high income countries are not doing that," he said.

He said growth in the world’s developing countries would remain strong, boosted by improved policies and favourable financial conditions.

The global output will rise from $35 trillion in 2005 to $72 trillion in 2030. Overall, developing countries’ share in global output will increase from about one-fifth of the world economy to nearly one-third.

But the report warns that the increase in wealth will further increase income inequality and environmental pressures. Analysing three possible consequences of the current economic trend — growing inequality, pressures in markets, and threats to the global commons -- the report predicts that in coming years they are likely to become more acute.

“If these forces are left unchecked, they could slow or even derail globalisation and thus adversely affect growth and development in many developing countries.”

The report also estimates that the world population will grow to eight billion by 2030.

With more rapid population growth, India will likely surpass China as the world’s most populous country sometime in next 25 years.

By 2030, Pakistan, Bangladesh, Nigeria, the Philippines and Vietnam will reach both thresholds. Already today the populations of Bangladesh, Nigeria, and Pakistan exceed 100 million.

But despite this rapid increase in population, the number of people with an income below $1 a day will fall to 550-million from 1.1-billion today. As more people in developing countries will move from agriculture into better-paid manufacturing and services jobs, the ranks of the middle classes will triple.

By 2030, 1.2-billion people in developing countries will earn between $4,000 and $17,000 a year. This would give countries as diverse as China, Mexico and Turkey average living standards comparable to Spain today.

The wealth increase comes at a cost, both socially as environmentally. Africa is most likely to fall further behind because of its political fragility and vulnerability to fluctuations in commodity prices.

In two-thirds of developing countries the income gap between the rich and the poor is bound to increase, the World Bank predicts. That is because a more integrated global economy offers opportunities to the well-educated, whereas unskilled workers have to compete harder and probably earn less to keep their jobs.

The pressures in labour markets will be partially offset by India and China’s hunger for energy, technology and investment goods. Hence, strategic investments in research, education and lifelong learning become more important than ever as a safeguard in a more competitive global economy.

The report proposes increase in development assistance and lowering of trade barriers to products from developing countries, especially agriculture and labour-intensive manufactures.

Even though a tapering down of growth to a sustainable but robust rate remains most likely, this positive outlook is subject to significant risks. Efforts to temper the expansion in some of the fastest-growing developing countries may not succeed, leading to stronger growth in the short term but a sharper slowdown later.

The report warns that a faster-than-expected weakening of housing markets in high-income countries could brake the economy much more abruptly than expected, thus weakening global demand.

Disruptions in oil markets are always possible. And the unwinding of the US current account deficit and its mirror surpluses in oil-exporting countries and East Asia could also be disruptive if sudden movements in capital markets, perhaps abetted by collective policy inaction, drive the rebalancing.

“Even so, these risks appear manageable, and the promising environment for growth makes this an opportune time to focus on long-term issues,” the report concludes.