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World: Five Developing Nations Could Become Economic Giants

Washington, 10 September 1997 (RFE/RL) - The World Bank says the next 25 years should see Russia, China, India, Indonesia and Brazil -- the big five of the developing world -- dramatically increase their role in the world economy, significantly changing world patterns of production, trade and resource allocation.

The bank, in it's annual Global Economic Prospects report released in Washington today, said these five large developing and transition countries account for half the world's labor force of 3.5 billion people and a third of the globe's cultivable land.

Yet, says the bank, these countries' share of the world economy and of global exports is only between eight and ten percent.

If, as seems possible, the market reforms started in these and other countries in transition over the last 15 years are sustained and deepened, these big five nations could double their share of world trade and economic growth by 2020.

For the nations in transition as a group, the bank's report projects that the annual economic growth rate should average 5.5 percent in the 1992-2020 period, while their share of world real GDP (gross domestic product, or a measure of the size of the economy) should jump from 3.2 percent in 1992 to six percent in 2020.

In trade, the nations of Europe and Central Asia, as a group, can expect to see import trade growth averaging 5.89 percent between now and 2006 while export trade growth should average five percent a year.

World Bank official Milan Brahmbhatt, principal author of the report, told reporters that with expected rapid growth and integration into the global economy over the next quarter of a century, the world could "witness an unprecedented increase in the weight of developing countries" in the world economy and in particular of the big five.

"This change will generate important benefits for the world, but will also require significant adjustments in many countries," said Brahmbhatt. Even with conservative estimates, he said, the big five developing countries, including Russia, could double their economic size and impact in the world, pushing their share of world output from around one-sixth today to a full third by 2020.

For the nations in transition in Europe and Central Asia, the report says that 1996 was a disappointing year because aggregate output for the group was estimated to have fallen 1.8 percent -- influenced by reduced exports to the critical West European market -- a sharp macroeconomic and financial crisis in Bulgaria and continued decline in Russia and Ukraine.

That growth rate is expected to turn positive this year. Signs of recovery should become "more prominent" in Russia and Ukraine later this year, says the report, and in 1998, based on continuing progress, they should see rising real incomes and consumer spending.

For the nations of Central and Eastern Europe, more advanced in their transition, growth this year is forecast to reach 3.5 percent, still a bit restrained by the loss of exports to West Europe.

But, says the report, with the gradual recovery in European Union markets, Hungary's emergence from earlier adjustment efforts and a catch-up by the late reforming countries like Romania and Bulgaria, the region should see growth of between 4 and 5 percent through 2000. Closer integration with the EU should allow a longer-run growth of about five percent, says the report.

Private capital flows into the transition nations in Europe and Central Asia were flat at around $30 billion in 1996, says the report, although this masked major variations, with the Czech Republic, Hungary and Poland still getting the largest flows of investment.

However, noted the report, these heavy investment flows also complicated management of the money supply, exchange and interest rates at a time when exports were weak, risking domestic overheating.

The World Bank's Chief Economist, Joseph Stiglitz says the report makes clear that globalization and technological progress are opening up "unprecedented opportunities" for developing and transition nations. But the process also carries costs and he says that while they are not heavy when looked at from a global perspective, they are very serious and damaging to individual people and countries.