The growing importance of emerging economies
The growing importance of the emerging market and developing economies ("emerging economies") is striking in both demographic and economic terms; and at both macroeconomic and microeconomic level.
Demographic trends. Emerging economies are home to over 80% of the world’s population. Moreover, due to the profound economic transformations under way, many of the emerging economies are faced with rapid urbanisation and massive migrations from rural areas to cities.
Economic importance: macro evidence. While the demographic numbers are high, the economic weight of these countries is also increasingly influential. Chart 1 below shows that emerging economies’ share in global output has increased from less than 20% in the early 1990s to more than 30% at present, measured at market exchange rates. If the concept of purchasing power parity (PPP) is used – that is, taking account of differences in the cost of living – the share of emerging economies in world GDP is already over 45%, 13 percentage points higher than in the early 1990s. According to the IMF’s World Economic Outlook, this share will surpass 50% in 2013.
Chart 1: Emerging economies' share of world GDP in recent periods.
Source: IMF World Economic Outlook June 2011.
Chart 2: GDP by country in 2010.
Source: IMF World Economic Outlook June 2011.
While these economies are already large, they continue to grow vigorously. The pace of growth in emerging economies and their increased resilience to economic and financial turbulence are good news for the world economy, which can rely on the dynamism of emerging economies more than in the past. People from emerging economies have reaped the benefits of such rapid development with higher standards of living. Between 2000 and 2009, GDP per capita has risen, albeit from low levels, by over 70% in these countries. The integration of emerging economies into global markets for goods and services has been similarly swift. As for world exports of goods and services, the combined share of emerging economies almost doubled between the early 1990s and 2010, reaching roughly 35%.
Economic importance: micro evidence. While emerging economies are rapidly gaining importance at the macroeconomic level, also at the micro level their greater role is becoming clear. In this context, for instance, seven out of the world’s 25 largest companies in terms of market value come from emerging markets (see the Global 2000 list at www.forbes.com)
Long-term economic outlook. The current situation looks promising for emerging economies, but the future seems even brighter. The projections for long-term growth, based on demographic trends and models of capital accumulation and productivity, indicate that emerging economies are likely to play an even greater part in the world economy. In this respect, several studies have found startling results regarding the growth prospects of emerging economies. According to some of these studies, Brazil, Russia, India and China, taken together, could account for over half the size of today’s six largest industrialised economies by 2025, and they could overtake them in less than 40 years.
Euro area perspective
From a euro area perspective, the growing role of the emerging economies presents several opportunities. In particular, vigorous growth in emerging economies increases the demand for a number of goods and tradable services where the euro area has comparative advantages. Emerging market competition also strengthens the incentives to make further progress in terms of structural reforms in the euro area, which are needed in any case.
The euro area, in addition, has the potential to take advantage of the new opportunities created by the emerging economies. Its exports and imports of goods and services account for an important share of GDP. In this respect, it should be highlighted that the share of euro area exports (excluding intra-euro area trade) to Asia increased from 19% in 2000 to 22% in 2009, whereas exports to the United States decreased from 17% to 12% in the same period. The share of China in total euro area exports increased from 2% in 2000 to 5.3% in 2009. Exports to Russia more than doubled during the same period, from 1.8% to 3.9%, thereby exceeding exports to Japan, although Russia’s share had been even higher in 2008 (5.0%), before the collapse in world trade. A similar trend can be identified for India, albeit on a much smaller scale, with this country accounting for 1.7% of euro area exports in 2009.
Regional integration processes and inter-regional relations
The ECB is a partner to several regional groupings, including emerging economies, which call on the ECB to share its experience via joint seminars and other initiatives involving policy-makers and, sometimes, academics. These seminars have also increasingly provided a more general opportunity to share policy-relevant information between the ECB and its counterparts.
In particular, the ECB co-organises Eurosystem high-level seminars with central banks and monetary authorities in the following countries or regions:
- South and East Mediterranean region
- Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP)
- Latin American central banks
- the Gulf Cooperation Council (GCC)
- the Central Bank of Russia
For more information see the press releases on International and European co-operation.
Seminars on regional economic integration issues and other issues of common interest have also taken place in the framework of the Asia-Europe Meeting (ASEM). Moreover, the ECB is in regular contact with regional entities such as the Gulf Cooperation Council (GCC), the Association of Southaast Asian Nations (ASEAN), the Asian Development Bank (ADB), the Centro de Estudios Monetarios Latinoamericanos (CEMLA), and the Inter-American Development Bank (IADB). Finally, the ECB regularly organises seminars on south-eastern Europe and non-EU emerging Europe.
ECB bilateral relations with emerging economies
Over the years, the ECB has been enhancing its bilateral relations with the authorities of emerging economies, especially their central banks, including through technical cooperation.
In particular, the ECB had a Memorandum of Understanding (MoU) with the People’s Bank of China (PBC) since 2002. This has made it possible to strengthen cooperation between the two institutions, including high-level meetings at Executive Board level and closer ties at staff level. In November 2007, the decision was taken to establish a permanent ECB-PBC working group to deal with topics of common interest. This working group meets every year at staff level and the ECB’s President also has talks with the Governor of the PBC.
The ECB also maintains close relations with the central banks of the candidate and potential candidate countries, including through the provision of technical assistance.
Finally, the ECB participates, alongside other representatives and bodies of the European Union, in a regular policy dialogue with the BRIC countries (Brazil, Russia, India and China).