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Rise of Asia is happening faster than expected: MGI report

Jul '19
Pic: MC Kinsey
Pic: MC Kinsey
India is poised to overtake the United Kingdom to become the world’s fifth largest economy, with a gross domestic product (GDP) about double the size of either Canada or Russia in the coming years, according to the Mckinsey Global Institute (MGI). The rise of Asia is happening faster than expected and Asian cities are already international financial centres, it said.

McKinsey & Company, in partnership with MGI, recently launched ‘Future of Asia’, research that examines how Asia will lead.

The MGI research examined 71 developing economies and singled out 18 of them for consistently posting robust economic GDP growth. All seven long term outperformers and five out of 11 recent outperformers are located in Asia.

The 21st-century will be characterised by a pivot towards Asia, and business and market leaders will need an accurate picture of what a future Asia will look like as they set long-term strategies, according to the study.

The region is on track to top 50 per cent of global GDP by 2040 and drive 40 per cent of the world’s consumption. Further, as consumption rises, more of what gets made in Asia is being sold locally instead of being exported to the West.

Today, 52 per cent of Asian trade is intra-regional. “While the previous era of globalization was marked by Western companies building supply chains that stretched halfway around the world as they sought out the lowest possible labour costs, today only 18% of goods trade involves exports from low-wage countries to high-wage countries," said Jonathan Woetzel, a senior partner at McKinsey and director of MGI.

As wages have risen in China, countries like Vietnam, India and Bangladesh have managed to grow their exports of labour-intensive manufactured goods by annual rates of 15 per cent, 8 per cent and 7 per cent respectively.

“While the trade intensity of goods has declined, service flows have become the real connective tissue of the global economy – and Asia’s services trade is growing 1.7 times faster than the rest of the world’s," the research states.

Additionally, over 40 per cent of the world’s 5,000 largest companies are Asian.

McKinsey projects that over the next decade, the region may fuel half of the consumption growth worldwide. (DS)

Fibre2Fashion News Desk – India

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