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Jim O'Neill

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2023-01-17
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2023-01-17
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  1. “I think one of the key takeaways is that over longer term horizons, more economically and also financial market growth is likely to be driven by emerging market economies over time. That hasn't been so true over the last 10 years, particularly in financial markets perspective, where we've had 10 years of exceptional U.S. growth, exceptional US financial market growth in particular. And there is a tendency to look to the recent past amongst many investors and to extrapolate to the future. One of the key points of our analysis is that over the very long term horizons going forward, actually more growth is likely to be driven outside of developed economies and more backs driven by large emerging markets in particular.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  2. “Think there's two risks that really I would highlight one is the threat to globalization itself from the rise in protectionism. In our analysis that actually globalization so far, the pace of that has slowed. It hasn't gone into reversal yet. But with the rise of popular nationalism in many economies and the rise of protectionism in some economies, I think the threat of a reversal to globalization is a clear risk to long-term outlook. The second risk that we focus on is the risk of climate change, which I think is particularly important for low-income developing economies which don't have the financial means of offsetting some of those risks. Because often these highly populous low-income emerging economies are in areas of the world which are most at risk from climate change.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  3. “We think it is, and actually the reduction that we've seen already in income inequality at a global level, I think runs counter to the common narrative that globalization has increased inequality. Because actually at the global level, that's not true, is that we find and we show within the piece that income conversions between countries has reduced global inequality. And that's a process we project will continue over time. One of the challenges, however, is that although global inequality has been declining in many countries, certainly the majority of developed economies, there has been an increase within country inequality. And so one of the challenges going forward for policymakers is to share the fruits more widely of the benefits of globalization has brought within countries to help to ensure that there is a backlash against globalization going forward.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  4. “So, if a key takeaway from your work remains that you're going to see this continued convergence between emerging market economies and developed market economies, does that mean that the problem of income inequality that you mentioned and that we're all very focused on is set to diminish over time?”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  5. “Main library is demographics. We've talked about the demographic problems that China faces in terms of slower population growth. That is not a factor in India's long-term economic outlook. It is already growing much faster than that of China. We'll continue to do so going forward. That would be a large driver on our projections of the catch up in the level of its GDP. The second factor for India, which wasn't true previously 10, 20, 30 years ago, is that it is now delivering on that potential. India historically was a relatively poor performer in terms of productivity convergence over the last 10, 15 years, has exhibited a much faster rated convergence than was previously the case. So the combination of these two factors, stronger demographics, faster catch-up growth, we think over time will drive India to be a much bigger force for the global economy than it is today.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  6. “Interestingly as well to me, if you think about the supercharged growth of China over the last couple of decades, your recent work increasingly shows that India is set for massive growth over the next couple of decades and will also catch up eventually to the US and China given that growth by 2075. So talk to us a little bit about the drivers behind that growth in India that you expect”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  7. “So, we expect on these revised projections for it to overtake the US in 2035. Interestingly, that is pretty much bang on where the original set of projections thought it would overtake 20 years ago. We had turned more optimistic in the 10 years ago projection. We had brought that forward to the late 2020s and now this set of projections, we're pushing it back again.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  8. “This claim will be perhaps surprising. I'll make a couple of points in this regard as to why I think it shouldn't be surprising going forward. First of all, that most of the convergence in China's GDP to US levels has already taken place. 20 years ago, they were only 12% of US GDP. They've already risen to 80% of US GDP. So most of that gap has already been closed. The second is that although we expect, and there has been quite a sharp slowdown in Chinese potential growth, it is still, we estimate around 4% per year, which is around double that of the US. The reason why it's still double that of the US is because of this income conversion. The fact that there's still a lot of catch-up growth to do. And given that China's population is so much larger than the US, roughly three times the size of the US population, it can achieve a higher level of GDP, even with a much lower level of GDP per capita.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  9. “There are over the very long term one of the advantages of these long term forecasts is that we can see over the next 18 years at least what labor force growth is likely to be going forward because even if there is a turnaround in birth rates in China today it's still going to be 15 to 20 years before the new births today will be entering the labor force in 15 20 years time so to a large degree that slower labor force growth that has taken place in China is already set in stone certainly over 15 to 20 year period”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  10. “But in particular, in China, when we look at some of these demographic headwinds, they actually have been a function of policy. And China is aware of this and have begun to take some measures to reverse that policy. Is there some potential for those trends to shift?”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  11. “The major force in China is demographic. So we're in around the peak population level in China this year. And there has already been quite a slowdown and the aging of the Chinese population to data. And that is a trend that is likely projected to continue going forward. So that is the major driver of the slowdown in Chinese growth. In addition to that, because China per capita has exhibited convergence over time to developed economies, the scope it has to continue to converge at the same pace has been reduced. So most of the slowdown is driven by slower population growth, demographic factors, but some of it is also driven by a slower rate of catch-up relative to the previous decade.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  12. “But it's interesting because if we talk a moment again about China, China still has relatively low per capita GDP, or I would say relative to developed economies, but you are actually expecting pretty sharp slowdown in Chinese growth over the next couple decades. So what's driving that if the income still suggests they have a lot of catch-up?”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  13. “There was a particularly strong trend in the first decade of this century. And despite the fact that global growth has slowed in the last decade, that convergence remains very much intact. And that appears to be a feature that is now pretty robust and one within our projections we expect will continue going forward.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  14. “Has been a slowdown in productivity growth as well over the last decade, which appears to be linked to the slowdown in globalization and global trade growth. That is something that will be inherently quite difficult to forecast over longer time horizons, but will play an important role in shaping future growth. If we broaden the discussion away from what will happen to global growth, but what will happen to individual countries within that picture, one of the key trends is that income convergence remains intact. So it is still the case that relatively low income economy, so emerging markets in particular, tend to be exhibiting faster GDP growth.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  15. “Absolutely. And what's interesting within that as well is that actually as we revise global population projections over time, the peak population growth is declining to previous expectations. So it was previously the case that global population was expected to be rising above 11 billion, for instance, by the end of this century. It's now projected to peak at around 10 billion and be declining by the end of the century. That slowdown in global population growth. One of, it's not the most important secular trend for the global economy over the rest of this century.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  16. “He is one of the major structural changes for the global economy than global population growth has slowed pretty significantly in the last 50 years and will continue to slow over the next 50 years. So global population growth 50 years ago was around 2% per year. It's now down to around 1% per year. It is projected to fall to zero over the next 50 years. That's a good problem to have in the sense that slower population growth over time, I think, is a necessary condition for climate sustainability. But that slowdown in the demographic picture presents a lot of economic challenges for economies going forward in terms of population aging, how to plan for growing pension sustainability and so forth. And it is one of the factors that we expect to drive a slowdown in global growth over time.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  17. “And so looking at those longer structural trends, one of your key findings is that the years of highest growth are actually behind us and growth is going to look much weaker based on those trends over the next couple decades than in the prior couple of decades, correct?”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  18. “There are important implications for long term investors, but actually it's from corporates in particular that we have the greatest demand for these types of projections. So corporates typically have longer-term horizons, need to make very long-term plans in terms of what markets they want to grow their market share in, what markets they want to target. And it's from those clients in particular that we have a lot of demand for these longer-term outlooks.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  19. “Future is inherently uncertain, and the long term future in some senses, particularly one of the advantages of doing these long-term forecasts is that they strip out to a large degree the cyclical volatility that forecasters struggle with so much. So the year-to-year cycle fluctuations that are inherently very difficult to predict is that over the longer term horizons that this set of projections, over 10, 20, 30, 50 years is that we can focus on things like population growth capital long-term productivity trends, and they are inherently more predictable. To give you an example of this is that let's take China's reopening from the COVID lockdown that is underway at the moment. That is crucially important for China's growth rate this year and into 2024. But whether that reopening goes well or whether it goes badly actually matters much less.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  20. “So, Kim, let me just take a step back here because most forecasters have a big challenge, even forecasting one year. So what is the value of forecasting over such long horizons? And how confident can we be just given the uncertainty that comes with that amount of time?”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  21. “Yeah, so if you look back the last 20 years as a whole, in the first 10 years of the initial projections, we were too conservative in terms of the growth of VMs and India and China in particular. Bear in mind, back at the time of the first set of projections, China was only 12% US GDP. It's now 80% of US GDP. So China and India in particular have grown over the 20 years as a whole actually faster than we anticipated.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  22. “At the time it wasn't anticipated that EMs would become the dominant force in the global economy that they are today. So I think what we got right was the growing importance of large EMs in particular and the contribution they make to global growth. Within that, on the individual economies, I think some we got very right. So India's and China's expansion in particular. But other elements we got wrong. We were over-optimistic on Brazil. We were over-optimistic on Russia, particularly over the last 10 years. There were some hits. There were some misses, but the broader message of the rise and importance of EMs, I think that has stood the test of time quite well.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  23. “So, this all started a little over 20 years ago when a former head of economic research, Jim O'Neill, coined the BRICS acronym. So Brazil, Russia, India, China. And what was revolutionary at the time of that research was really the concept that you would get very rapid growth over time in large emerging markets. So India and China in particular, and to a lesser extent, Brazil and Russia, more generally that emerging markets would capture a much larger share of GDP over time. We had a major update 10 years ago where we reviewed our long-term projections and revised them. And so a little over 20 years since the first set of projections, we've updated them again and expanded them as well to include a broader range of economies. So we now have 104 economies and we've extended the forecast horizon as well out to 2075.”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT

  24. “I'm Alison Ethan, and this is exchanges at Goldman Sachs. What long-term trend will shape the global economy? Which countries will power global growth in the decades to come? And what does this mean for investors' portfolios? For today's episode, I'm sitting down with my colleague Kevin Daly to discuss his very long-term view on global growth. Kevin is the co-head of the economics team covering Central and Eastern Europe, the Middle East, and Africa for Goldman Sachs research. Kevin, welcome to the program”

    2023-01-17 · Goldman Sachs Exchanges · The global economy in 2075: Growth slows as Asia rises · IDENTIFIED FROM THE TRANSCRIPT