By 2025, six major emerging economies—Brazil, China, India, Indonesia, South Korea, and Russia—will account for more than half of all global growth, and the international monetary system will likely no longer be dominated by a single currency, a new World Bank report states - and considered one of 10 major trends by the World Future Society.

" As economic power shifts, these successful economies will help drive growth in lower income countries through cross-border commercial and financial transactions," the report says.

"Global Development Horizons 2011—Multipolarity: The New Global Economy" projects that as a group, emerging economies will grow on average by 4.7 percent a year between 2011 and 2025. Advanced economies are forecast to grow by 2.3 percent over the same period. The euro area, Japan, the United Kingdom, and the United States will remain prominent in the global economy.

According to the report, emerging economies that used to rely on technological adaptation and external demand to grow will have to make structural changes to sustain their growth momentum through productivity gains and robust domestic demand.

The emergence of middle class
The report highlights the diversity of potential emerging economy growth poles, some of which have relied heavily on exports, such as China and Korea, and others that put more weight on domestic consumption, such as Brazil and Mexico. With the emergence of a substantial middle class in developing countries and demographic transitions underway in several major East Asian economies, stronger consumption trends are likely to prevail, which in turn can serve as a source of sustained global growth.

“In many big emerging economies, the growing role of domestic demand is already apparent and outsourcing is already under way. This is important for the least developed countries, which are often reliant on foreign investors and external demand for their growth,” says Hans Timmer, the World Bank’s director of development prospects.

The shift in economic and financial power toward the developing world has important implications on corporate financing, investment, and the nature of cross-border merger and acquisition (M&A) deals. As more deals originate in emerging markets, South-South FDI is likely to rise, with most of it going into greenfield investments, while South-North FDI is more likely to target  acquisitions. As they expand, more developing countries and their firms will be able to access international bond and equity markets at better terms to finance overseas investments.

Important role for the renminbi
“Over the next decade or so, China’s size and the rapid globalization of its corporations and banks will likely mean a more important role for the renminbi,” said Mansoor Dailami, lead author of the report and manager of emerging trends at the World Bank. “The most likely global currency scenario in 2025 will be a multi-currency one centered around the dollar, the euro, and the renminbi.”

To sustain growth and cope with more complex risks, economies that are home to emerging growth poles need to reform their domestic institutions, including in the economic, financial, and social sectors. China, Indonesia, India, and Russia all face institutional and governance challenges. Human capital and ensuring access to education is a concern in some potential growth poles, particularly Brazil, India, and Indonesia.

Most developing countries, particularly the poorest ones, will continue to use foreign currencies to carry out transactions with the rest of the world, and will remain exposed to exchange rate fluctuations in an international multi-currency regime. Multilateral institutions have to help countries transition to the new multi-polar world. This will require technical assistance, aid, and policy advice to equip developing countries with the necessary tools and financial capacity to respond to anticipated challenges and risks, while capitalizing on their strengths and opportunities.

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www.worldbank.org/gdh2011
www.wfs.org