Emerging economies such as China and India are forecast to outspend developed nations on factories, offices, roads and other infrastructure for the first time ever this year!
The money going to bullet trains in China, power plants in India and office buildings in Brazil will push emerging market investment tallies higher than in the developed world this year for the first time, according to a Citigroup analysis of International Monetary Fund data.
Urbanisation is one of the drivers of this growth. McKinsey & Co. predicts that the number of people in cities will grow by 1,5 billion in the next 20 years as people leave farms in search of higher paying jobs and improved standards of living. “China will need to add residential and commercial buildings equal to all of New York every two years”, says Richard Dobbs at the McKinsey Global Institute based in Seoul.
Of course the investment boom also carries hazards. “It may end up raising borrowing costs”, says Nobel laureate economist Michael Spence. And we know too well that interest rates play havoc with budgets. “It’s reasonable to expect a fairly sharp rise in interest rates in the relatively near future”, Spence says.
How can this massive and rapid growth positively influence your business?