The Group of Seven nations’ share of the global economy will slide to less than 50 percent in 2012, signaling that developing markets may further outperform industrial nations.
The CHART OF THE DAY tracks the declining share of nominal gross domestic product of the U.S., Japan, Germany, the U.K., France, Italy and Canada against the rest of the world, with forecasts through 2015, based on data compiled by Bloomberg from the International Monetary Fund. The seven economies will generate less than 50 percent of global GDP by 2012, from about 70 percent in the mid-1980s. China’s output may surpass 10 percent of the world’s within two years, compared with 2 percent in 1987.
The MSCI Emerging Markets Index of stocks from 21 developing countries has gained more than 12 percent this year, compared with increases of 6.5 percent in the Standard & Poor’s 500 Index and 5.5 percent by the Stoxx Europe 600 Index.
“Emerging markets should incrementally outperform the developed world both in terms of economic growth and financial- market returns, at least for a while,” said Venkatraman Anantha-Nageswaran, global chief investment officer at Bank Julius Baer & Co. in Singapore. “The sustainability of their outperformance will depend on how they handle inflation and asset-bubble risks.”
World leaders have already decided to make the Group of 20 the main forum for global economic coordination instead of the G-7 plus Russia. The G-20, which includes China, Brazil, India and Russia, accounts for about 85 percent of global economic output and was created after currency devaluations plagued emerging markets from Russia to Thailand in the 1990s. Finance ministers and central bankers from the group will meet today and tomorrow in Gyeongju, South Korea.
To be sure, although the G-7’s share of economic output is shrinking, “collectively, the U.S., Europe and Japan are still too big and too important to be written off,” said Anantha- Nageswaran, who helps manage about $170 billion in assets.