Seventeen years from now, half the global stock of capital, totaling $158ttn (in 2010 dollars), will reside in the developing world, compared to less than one-third today, with countries in East Asia and Latin America accounting for the largest shares of this stock, says the latest edition of the World Bank's Global Development Horizons (GDH) report, which explores patterns of investment, saving and capital flows as they are likely to evolve over the next two decades. With gradual convergence, the contribution of developing countries to global growth will rise from 73% around 2015 to 87% by 2030; with rapid convergence, developing countries’ contribution will reach 93% by the end of the period.

Developing countries' share in global investment is projected to triple by 2030 to three-fifths, from one-fifth in 2000, says the report, titled ‘Capital for the Future: Saving and Investment in an Interdependent World'. With world population set to rise from 7bn in 2010 to 8.5bn 2030 and rapid aging in the advanced countries, demographic changes will profoundly influence these structural shifts.

"GDH is one of the finest efforts at peering into the distant future. It does this by marshaling an amazing amount of statistical information," said Kaushik Basu, the World Bank's senior vice president and chief economist. "We know from the experience of countries as diverse as South Korea, Indonesia, Brazil, Turkey and South Africa the pivotal role investment plays in driving long-term growth. In less than a generation, global investment will be dominated by the developing countries. And among the developing countries, China and India are expected to be the largest investors, with the two countries together accounting for 38% of the global gross investment in 2030. All this will change the landscape of the global economy, and GDH analyzes how."

The report says that productivity catch-up, increasing integration into global markets, sound macroeconomic policies, and improved education and health are helping speed growth and create massive investment opportunities, which, in turn, are spurring a shift in global economic weight to developing countries. A further boost is being provided by the youth bulge. With developing countries on course to add more than 1.4bn people to their combined population between now and 2030, the full benefit of the demographic dividend has yet to be reaped, particularly in the relatively younger regions of Sub-Saharan Africa and South Asia.

The good news is that, unlike in the past, developing countries will likely have the resources needed to finance these massive future investments for infrastructure and services, including in education and health care. Strong saving rates in developing countries are expected to peak at 34% of national income in 2014 and will average 32% annually until 2030. In aggregate terms, the developing world will account for 62-64% of global saving of $25-27tn by 2030, up from 45% in 2010.

GDH paints two scenarios, based on the speed of convergence between the developed and developing worlds in per capita income levels, and the pace of structural transformations (such as financial development and improvements in institutional quality) in the two groups. Scenario one entails a gradual convergence between the developed and developing world while a much more rapid scenario is envisioned in the second.

The gradual and rapid scenarios predict average world economic growth of 2.6% and 3% per year, respectively, during the next two decades; the developing world's growth will average an annual rate of 4.8% in the gradual convergence scenario and 5.5% in the rapid one.

In both scenarios, developing countries' employment in services will account for more than 60% of their total employment by 2030 and they will account for more than 50% of global trade. This shift will occur alongside demographic changes that will increase demand for infrastructural services. Indeed, the report estimates the developing world's infrastructure financing needs at $14.6tn between now and 2030.

The report also points to aging populations in East Asia, Eastern Europe and Central Asia, which will see the largest reductions in saving rates. Demographic change will test the sustainability of public finances and complex policy challenges will arise from efforts to reduce the burden of health care and pensions without imposing severe hardships on the old. In contrast, Sub-Saharan Africa, with its relatively young and rapidly growing population as well as robust economic growth, will be the only region not experiencing a decline in its saving rate.

In absolute terms, however, saving will continue to be dominated by Asia and the Middle East. In the gradual convergence scenario, in 2030, China will save far more than any other developing country -- $9tn in 2010 dollars—with India a distant second with $1.7tn, surpassing the levels of Japan and the United States in the 2020s.

As a result, under the gradual convergence scenario, China will account for 30% of global investment in 2030, with Brazil, India and Russia together accounting for another 13%. In terms of volumes, investment in the developing world will reach $15tn (in 2010 dollars), versus $10tn in high-income economies. China and India will account for almost half of all global manufacturing investment.

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