Western seeds, global flowering

27 January 2011 By Ian Campbell

The supercycle is a reality. China and other emerging economies will grow fast over long periods, albeit with hiccups. But the new economies will want resources and capital and that could drive up global rates and inflation. Fast growth is good but the West can’t be complacent.

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The IMF's latest World Economic Outlook, issued on Jan. 25, revised up its global growth forecast for 2011 from 4.2 percent to 4.4 percent. The IMF predicts 6.5 percent GDP growth in emerging economies in 2011 and 2012. It sees the U.S. economy growing by 3 percent in 2011 and the euro zone and Japan by 1.5 percent.

Standard Chartered reckons the supercycle in which the world enjoys a sustained period of high economic growth started in 2000. It expects the upswing to last at least another couple of decades. The bank says the world economy doubled in size between 2000 and 2010.

A report by McKinsey Global Institute entitled Farewell to Cheap Capital concludes that the "lowinterest rate environment is likely to end in the coming years" because "developing economies are embarking on one of the biggest building booms in history."

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