'Big Five' nations to redraw world economic map

'Big Five' nations to redraw world economic map

WASHINGTON (Reuter): The world economy will change fundamentally over the next 25 years as Indonesia, Brazil, China, India and Russia assume more central roles in the global marketplace, the World Bank said on Tuesday.

The international lending agency said in a report that the so- called "Big Five" developing economies, which currently account for less than a 10th of global output and trade, could double their share of the world market and surpass the European Union by 2020.

"We stand at a unique moment in history," said Joseph Stiglitz, World Bank chief economist.

The bank said growth by developing countries averaged only 1 percent a year between 1820 and 1950, about half the rate of many high-income countries.

But over the past decade, developing countries, led by the so- called "tiger economies" of Southeast Asia, grew at a somewhat healthier average rate of 2.6 percent a year.

In its report, "Global Economic Prospects and the Developing Countries", the bank said the outlook for emerging economies was far more favorable over the next 10 to 25 years.

"The next 25 years could witness an unprecedented increase in the weight of developing countries in the world economy," Milan Brahmbhatt, principal author of the report, told a news conference. "This change would be unprecedented in both its size and speed."

The bank said growth by developing countries should jump to 5.4 percent from 1997 to 2006. Over the next 25 years, developing countries could grow at an average rate of between 5.0 percent and 6.0 percent a year, it said.

But growth will not be restricted to the Big Five. The banks said output could double in the rest of Latin America, Sub-Saharan Africa, the Middle East and North Africa.

In the formerly communist economies of Central and Eastern Europe, better conditions in export markets and continued strength in investment should fuel a rebound in growth to 4 percent or 4.5 percent a year over the next 10 years, the report said.

It said there was a risk of backtracking in some regions of the former Soviet Union, but economies there were stabilizing, and growth could reach 5.0 percent to 6.0 percent by the year 2000.

East Asian countries may have difficulty maintaining the extremely rapid pace of growth of the past decade, but should continue to rack up solid gains, the World Bank said.

The region has been hit by Thailand's financial crisis and $17 billion in loans have not yet restored confidence.

The World Bank warned that strong growth by industrial countries over the next year could lead to higher interest rates, which may slow growth in private capital flows to developing nations from the rapid pace of the last two years.

This could hurt countries where capital flows are financing high current account deficits and where banks are burdened by bad debt, it added.

"But on the whole, the global picture looks very encouraging," Brahmbhatt said.

The bank said the changes it predicted could have major trade and labor implications for industrial powers.

Developing nations will become the fastest growing markets for all products and some developed countries could find it harder to compete in labor-intensive sectors.

But the World Bank said the rewards for rich and poor would far outweigh the short- and medium-term costs.

"The potential rewards of this expansion will be very large, both in terms of the growth of important export markets and as a source of imports," Stiglitz said.