The World is in a Super-cycle once again, this time led by Asia - From Standard Chartered

The World is in a Super-cycle once again, this time led by Asia

The world is in a sustained period of high economic growth, or super-cycle, which started in 2000 and is expected to last at least another couple of decades and see the global economy reach over USD 300trn in size by 2030, up from USD 62trn today, according to a special report by Standard Chartered. The world economy has already doubled between 2000 and 2010.

The developed economies will do well through the super-cycle, but the emerging markets will do much better. As a result, the global balance of economic power will shift decisively from the West to the East, according to the report.

The key drivers 
The key drivers of the super-cycle will be increased trade, especially among emerging markets, rapid industrialisation, urbanisation and booming middle classes in the developing world. The number of people living in the cities will grow to 5bn in 2030, up from 3.4bn today.

Asia will drive most of the global growth over the next 20 years, during which global output is conservatively set to more than double in real terms, having already risen more than 50 per cent in the last decade. Living standards, as measured by real per capita income, will have increased nine-fold in China and India between 2000 and 2030. Rising personal incomes will push billions of people into the middle classes and drive consumption which will spur domestic economic growth. China is likely to grow at a 6.9 per cent rate over the next two decades and overtake the US to become the world’s economic superpower within a decade. Meanwhile, India is likely to grow at an average 9.3 per cent pace over the same period and tail the US as the third largest economy by 2030, the report forecasts.

Implications for financial assets

Financial markets have not fully factored in either the scale or the profound changes that will likely take place, the report concludes. This provides plenty of opportunities across all asset classes for investors and companies. For long-term investors, the super-cycle points to greater allocation of capital into equities, especially those benefitting from the strong growth in the emerging markets, rapid urbanisation and the growing middle classes. Equities, commodities and real estate investments are also likely to do better than fixed income assets.