- World GDP forecast to grow faster this decade than in any of the previous three
- Bric countries powering this global economic expansion
- Concerns that Europe's economic woes could impede this growth
Stagnation and political turmoil erode region's global relevance
Although it may not feel like it if you are living in Europe or the US or Japan, it is quite possible that the global economy will expand at a faster rate this decade than in any of the previous three.
Goldman Sachs is forecasting that global gross domestic product will rise at an average annual rate of 4.1 per cent from 2011 to 2020. In the previous three decades, that growth rate never exceeded 3.5 per cent.
What is changing with exhilarating speed is the source of that growth. Many of the world's biggest emerging markets have finally emerged and are now powering global expansion. In 2011, Brazil, Russia, India and China (the original Bric countries) created the equivalent of a new Italy in terms of economic output.
Jim O'Neill, the Goldman Sachs economist who invented the Bric acronym, says: "Most people still do not understand the scale of China and the speed it is moving. Its GDP is now about $8.2tn, half the size of the US. China growing at 8 per cent a year is equivalent to the US growing at 4 per cent."
"China creates a Greece in 12.5 weeks. Since 2010 China has created an India," he says in an interview at the Ambrosetti finance forum.
The speed of this economic transformation is awe-inspiring to many Europeans, still trapped in the snare of their financial crisis. The Ambrosetti forum, held by Lake Como in northern Italy, is often a place "where the high mass of EU politics is celebrated", as one participant put it. But there is a gnawing realisation among the region's leaders that economic stagnation and political turmoil in Italy and beyond are now rapidly eroding Europe's way of life and its global relevance.
To many of the non-European participants at the forum, Europe appears to be a source of exasperation more than a model worthy of emulation, as it often imagines itself to be.
Changyong Rhee, chief economist at the Asian Development Bank, says that many Asian countries are concerned that Europe could trigger another round of global economic uncertainty, because of persistent recession in several eurozone countries, political instability in Italy, and talk of the UK quitting the EU.
Mr Rhee praises Europe for making significant progress in addressing its financial crisis, moving towards creating a banking union and a fiscal union. The establishment of a permanent rescue fund and the European Central Bank's Outright Monetary Transactions (OMT) programme, intended to suppress eurozone sovereign bond yields, have also stabilised financial markets, he says.
But the Korean economist says the eurozone must finish the reforms it has started for the sake of the global economy, as well as its own self-interest. "The institutional building is incomplete," he says. "If Europe stops now there will be serious global consequences."
That makes it all the more troubling that some UK politicians are talking about the possibility of withdrawing from the EU, he says. "Many people understand why the UK is concerned about staying in the EU. But what worries us is if the UK leaves will it trigger a domino effect in Europe. The worry is that there will be an unravelling of the EU.
"It may be a selfish perspective from an Asian point of view but one country's decision will affect the whole global economy."
For the moment, Europe still matters hugely to many emerging markets, according to Gill Marcus, governor of the South African Reserve Bank. Not only does South Africa have close historic ties to Europe but the country also sends 38 per cent of its manufactured goods exports to the region, according to Ms Marcus.
"But we are seriously concerned about what is happening in Europe," she says. "Assuming nothing gets worse Europe will still have a very long recovery time. It will become all the more imperative for emerging markets to diversify."
In a sign of the times, South Africa is hosting the next Brics leaders' summit in Durban in two weeks' time, seeking to strengthen its relations with the more dynamic economies of the world.