Japan set to drop out of world's big three

FRANKFURT - China and India will be the world's second and third largest economies by 2020, pushing Japan into fourth place, according to research by Deutsche Bank. The United States will remain the biggest economy.

India and Malaysia will overtake China to become the world's fastest-growing economies over the next 15 years, due mainly to strong population growth.

Among developed nations, Spain will join Ireland and the United States as the star growth performers between next year and 2020.

Spain is expected to have the highest growth rate per head of population in the Organisation for Economic Cooperation and Development.

Deutsche Bank's analysis of the impact on economic growth of demographics, education, investment and openness on economies showed the importance of population growth.

The most striking exception was Spain, where GDP growth was expected to accelerate to 2.8 per cent annually, compared to less than 2 per cent for the euro zone, despite minimal population growth.

Deutsche Bank said Spain's increase would be driven by increased trade links to Latin America and North Africa as well as higher education levels.

"Spain was the surprise candidate," said Deutsche Bank chief economist Norbert Walter. "Who would have thought Spain would grow faster than Germany?"

Germany, the biggest economy in the euro zone, was expected to expand by just 1.5 per cent a year.

An expected average annual expansion of 5.5 per cent in India and 5.4 per cent in Malaysia would be largely driven by growing population levels as well as education levels and trade.

Chinese growth was forecast to average 5.2 per cent, only half the 10 per cent average growth recorded over the past 20 years.

"The difference between China and India is solely due to the fact population growth is 0.8 percentage points slower in China, where the results of two decades of the one-child-policy begin to show," Deutsche Bank said.

Annual population growth of 1.1 per cent would pay dividends for the Irish economy, expected to expand by 3.8 per cent a year.

Annual growth in GDP

Forecast 2006-2020, (%)

India 5.5

2 Malaysia 5.4

3 China 5.2

4 Thailand 4.5

5 Turkey 4.1

6 Ireland 3.8

7 Indonesia 3.5

8 South Korea 3.3

9 Mexico 3.2

10 Chile 3.1

- REUTERS