Seven economies are the potential drivers of Asia’s rise over the next 40 years into a powerhouse that accounts for just over half of global output, the Asian Development Bank (ADB) said in a report released on Wednesday.
In the report on Asia in 2050, the ADB said the dominant economies needed to avoid falling into the middle-income trap that has seen the development of other emerging markets stall.
If they can achieve that, some 3 billion people will enjoy prosperity a generation earlier than they otherwise would, the ADB said at its annual meeting in Hanoi.
“Yawning inequalities must be narrowed and — as home to over half of the world’s population — Asia must confront a massive wave of urbanisation and changing demographic profiles,” the ADB said, adding the region’s urban population would nearly double to 3.1 billion people by mid-century.
Necessary reforms included improved governance and strong institutions — which the ADB said was an Achilles heel for most economies in the region — and tackling environmental challenges to ensure food and water supplies.
“Asia’s rise will be led by China, India, Indonesia, Japan, South Korea, Malaysia, and Thailand,” the ADB said.
The seven economies had a combined GDP of $14.2 trillion in 2010, 87 percent of Asian GDP, and a total population of 3.1 billion, or 78 percent of Asia’s people.
The study found that by 2050, the seven could account for 90 percent of Asian GDP — and 45 percent of global output — even as their share of Asia’s population falls to 73 percent.
Average per capita income across the seven countries would be $45,800 in purchasing power parity terms — 25 percent higher than the global average of $36,600, the study found.
MIND THE GAP
The middle income trap, which sees per capita income stall before advanced-economy levels, usually occurs as countries try to change from resource-driven economies reliant on cheap labor and capital to growth based on high productivity and innovation.
The ADB said based on Asia’s record over the past 25 years, there were three categories of Asian economies.
Seven — Brunei, Hong Kong, Japan, South Korea, Macau, Singapore and Taiwan — had grown rapidly since the 1950s, “avoiding the middle income trap and becoming high-income developed economies in one generation.”
A second group of 11, including China and India, have posted high growth since 1990 but now face the greatest risk of seeing per capita income stalling at middle-income levels.
The others in this group are Armenia, Azerbaijan, Cambodia, Georgia, Indonesia, Kazakhstan, Malaysia, Thailand, and Vietnam.
“Several of these economies, or the larger ones, could easily derail the enticing prospect of the Asian Century,” the report said.
Another 31 economies, which include Pacific Island nations and also countries such as the Philippines, Myanmar, Iran and Uzbekistan, have achieved only modest or low long-term growth.
“Their success in joining the ranks of the fast-growing group would significantly facilitate the spread of affluence to all Asians,” the ADB said.
The ADB is charged with fighting poverty in a region that includes small Pacific islands, Southeast Asia, the giant economies of China and India, and central Asian republics such as Kazakhstan.