World economy to become less volatile in future, says World Bank report (10 Jun 2011)

World economy to become less volatile in future, says World Bank report
By Ryan Huang | Posted: 10 June 2011 2055 hrs

SINGAPORE: According to a recent report by the World Bank, six countries will support more than half of the world's growth in 2025. It said this reflects the steadily increasing gap between the growth rates of emerging markets and developed economies.

More countries will become growth engines for the global economy, on top of developed economies like the US.

The World Bank said these will be countries with high growth rates, strong human capital, and technological innovation.

It identifies six countries that will account for more than half of global growth in the next 15 years. These comprise the BRIC countries - Brazil, Russia, India, and China - as well as South Korea and Indonesia.

These latest additions would only translate to a more stable global economy.

Mr Mansoor Dailami, Manager of the Development Prospects Group at the World Bank, said: "When you have a multiplicity of growth centres, the world economy does not depend on any particular national economy as the driver of global growth. When you're talking about eight or nine other countries contributing to global growth, as a result you have more stability in terms of a growth scenario."

The World Bank said the gap between the growth rates of the emerging and developed markets is steadily increasing. It estimates that for the next 15 years, developing economies will expand by an average of 4.7 per cent per year, and the developed ones by 2.3 per cent.

And by the same time, the global financial system is also expected to no longer be dominated by the US dollar or any single currency.

Mr Dailami said: "Over the next two decades, is that we could have a multi currency international regime, based on basically three currencies, the US dollar, the Euro, and the Chinese Renminbi, as the central component of international currency system. When we talk about Renminbi becoming a international currency, it doesn't mean that the Renminbi will score the same importance as the US dollar and Euro, but Renminbi becomes important in international trade for instance.

"The dollar is going to be ahead no doubt, because number one is not only the familiarity of the dollar but the size of the US debt market. There's no other currency, there's no other country that could have that for a central bank to be able to invest in assets, number one there has to be high quality assets that."

With a more diversified range of global growth engines, the World Bank said it would become even more important for international cooperation and to strengthen regulatory institutions and legal frameworks.

-CNA/ac

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