There’s more to the Commonwealth than the games
In this perspective Ruth Lea, economic adviser to the Arbuthnot Banking Group, discusses the growing economic prospects for the Commonwealth countries.
The main findings are:
* Commonwealth countries account for 16% of world GDP (PPP terms) and contain over two billion of the world’s seven billion people. The diverse, modern 53-member Commonwealth spans five continents and contains developed, emerging and developing economies.
* All the major Commonwealth countries have favourable demographics which should support buoyant economic growth going forward. Specifically, the Commonwealth’s demographics compare very favourably with several major European countries, where working populations will age and shrink.
* According to the IMF’s April forecast the Commonwealth’s GDP (PPP terms) could nudge ahead of the EU28’s GDP in 2019. Given the faster average growth rates the Commonwealth can then be expected to pull ahead of the EU28.
* In GDP (MER) terms the EU28 is still expected to be significantly larger than the Commonwealth in 2019. But as the 21st century proceeds and the emerging and developing Commonwealth countries get richer, their currencies should appreciate and the nominal GDP estimates (MERs) should tend to converge with the PPP GDP estimates.
* The incomes per capita and, hence, disposable incomes, in emerging and developing countries are still well down on those in, say, Germany. But a recent EY report on emerging markets concluded that “…large populations and rapid economic growth mean China and India will become the powerhouses of middle class consumerism over the next two decades.”
* The share of UK exports to the EU28 (45%) was still significantly higher in 2012 than the share to the Commonwealth (81Ž2%). But the EU share is falling, whilst the Commonwealth share is rising. Moreover, the UK runs an overall surplus with the Commonwealth whereas in 2012 the UK ran a deficit of over £44mn with the EU.
Ruth Lea said, “Commonwealth countries considered together as an economic entity are rarely discussed in Britain. Yet, taken together they are already an economic colossus and their prospects are bright. Moreover, the Commonwealth in its diversity captures the character of the 21st century globalised economy as no other economic grouping can. This can only be to their benefit as the 21st century proceeds.”