Many of the world’s advanced economies remain mired in low economic growth trajectories. And as the latest IMF report on global GDP shows, 2013 is shaping up to be a year of stalled recovery and sputtering/no growth in many developed economies. However, the same report highlights the continued growth of developing economies and notes that this is the main factor that’s keeping the global economy as a whole from slouching further toward stagnation.
As shown in the chart below, the high GDP growth economies are clustered in three broad areas: the Asia-Pacific region, (excluding Japan), Central and South America (strongest on Pacific side), and Africa – in particular the middle 2/3 of resource rich African countries.
What does this global GDP growth pattern mean for Canada and British Columbia?
While North-South trade patterns continue to be important foundations for Canada, and we will benefit from the modest economic recovery unfolding in the United States, it is the tremendous growth in Asia – both in real and percentage terms – that has a pronounced effect on trade and by extension, on our own prospects for economic growth and prosperity.
Projecting outward, the OECD recently predicted that in less than 50 years China and India’s GDP will exceed the entire OECD’s GDP while the citizens of these emerging giants will experience a remarkable seven fold increase in incomes – an unprecedented (combined) level of growth in human history.
Today’s economic winners, expressed by GDP growth and the corresponding shift in investment/trade, will include areas that provide the natural resource inputs required to enable the largest conversion of ‘poor’ to ‘middle’ class citizens in human history. Expressed in real terms, according to the OECD, in 2010 Asia accounted for less than one-quarter of the global middle class. But by 2020, that share is expected to double, meaning more than half the world’s middle class population will be found in Asia and that Asian consumers should account for at least two-fifths of total global middle class consumption.
However, natural resource trade is only part of the story related to the rise of Asia. Across the board, the emerging Asian economies are ‘shifting up’ trade in the goods and services (diversified food products, new energy needs, imported building materials, technology, environmental, health and food safety, and increasingly ‘family’ improvements such as offshore education and tourism) that an emerging middle class associates with improved living standards. It is in this set of middle class needs that the prospects for sustained, diversified economic growth can manifest in countries like Canada.
While Canada and BC are theoretically well positioned to benefit from these shifts, our prosperity is by no means assured through our location as a Pacific Gateway, our vast natural resource base and our diverse people and institutions. The challenge for our businesses and governments is to more fully integrate our strategic advantages, while at the same time understanding the transformation of a global economy where capital and people are highly mobile. As the evolving global GDP growth patterns show, we have strong competition from both existing and emerging jurisdictions. In this era of both opportunity and challenge, benefitting from the global shifts in economic growth and dynamism will require more collaboration, a stronger focus on competitiveness, and far-sighted leadership in both government and business if we are to realize our potential.