Economists predict 'super-cycle' of high global growth
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For only the third time since the Industrial Revolution, the world may be entering a long-term growth cycle that will lift all economies simultaneously, driving bond yields and commodity prices higher.
The depth and scope of the expansion will be a focus for discussion at this week's annual meeting of the World Economic Forum in Davos, Switzerland. Evidence of a broadening global recovery will enable US Treasury Secretary Timothy F. Geithner, investor George Soros and 2,500 political, business and academic leaders to shift their emphasis away from crisis-fighting.
With the economic and investment outlooks "much better" than in recent years, "people are talking about how to get back to business as usual and what comes next," said Jitesh Gadhia, a delegate to the conference and the London-based senior managing director at Blackstone Group LP, which runs the world's largest buyout fund.
Economists predict a growth spurt in coming decades led by emerging nations that will be strong enough to boost developed economies.
Global gross domestic product will swell to $143 trillion by 2030, allowing for inflation and market-exchange rates, from $62 trillion in 2010, with China and other emerging markets accounting for about two-thirds of the rise, estimates Gerard Lyons, chief economist and group head of global research in London for Standard Chartered, which generates most of its earnings from Asia.
Lyons and his colleagues predict a "super-cycle" of historically high growth that will last at least a generation and will be led by booming trade, investment and urbanization, according to a report published in November.
Richard Dobbs, a director of the research division at New York-based McKinsey & Co, will use the Davos meeting to highlight a study by the international consulting firm that sees an imminent end to cheap capital. The causes are a building bonanza in developing economies and ageing populations who are draining their savings, according to the report, which was released Dec 9.
"It's a topic capturing the attention of people who want to think beyond the crisis," said Seoul-based Dobbs. While Goldman Sachs Asset Management Chairman Jim O'Neill has found fame for promoting the "BRIC" economies of Brazil, Russia, India and China, he says their rise has a positive impact beyond their borders, with Chinese imports totaling about $400 billion, almost the equivalent of South Africa's economy last year. That should attract investors to rich-nation companies with links to these markets, and the resurgence in the US economy has prompted O'Neill to predict higher US bond yields in 2011. He didn't provide a specific forecast.
"World-trend economic growth is being lifted," said London-based O'Neill, who helps manage $840 billion. "The notion that BRICs benefit at the expense of others is increasingly out of date."
Developed nations will benefit as their emerging-market counterparts invest more abroad, hire more of their workers and rely on their expertise in areas such as financial services, said Lyons. He predicts both the US and European Union will enjoy an average trend growth of 2.5 percent through 2030, compared with the 1.9 percent and 1.7 percent he forecasts for this year.
"It's a win-win situation," said Lyons, who concedes growth won't always be strong and continuous during the entire period.
