Emerging economies, productivity growth and trade with resource-rich economies by 2030

Abstract

Rapid economic growth in some emerging economies in recent decades has significantly increased their global economic importance. If this rapid growth continues and is strongest in resource-poor Asian economies, the growth in global demand for imports of primary products also will continue, to the ongoing benefit of natural resource-rich countries. This paper explores how global production, consumption and trade patterns might change over the next two decades in the course of economic development and structural changes under various scenarios. We employ the GTAP model and version 8.1 of the GTAP database with a base year of 2007, along with supplementary data from a range of sources, to support projections of the global economy to 2030. We first project a baseline assuming that trade-related policies do not change in each region but that factor endowments and real GDP grow at exogenously estimated rates. That baseline is compared with two alternative scenarios: one in which the growth rates of China and India are lower by one-quarter and the other in which this slowdown in emerging economies leads to slower productivity growth in the primary sectors of all countries. Throughout the results, implications are drawn out for natural resource-abundant economies, including Australia and New Zealand.