A Cebr report sponsored by The Chartered Institute of Building
This new study by global economic consultants Cebr and released in London and Beijing today, looks at the global economic impact of the Belt and Road Initiative (BRI).The study uses Cebr’s economic impact of transport and infrastructure analysis and Cebr’s trade frictions analysis. The research considers the economic impact of the initiative on the global economy, on each of the ten regions of the world and on 25 leading economies.
The key points of the study are:
- The BRI is likely to boost world GDP by $7.1 trillion per annum by 2040. This raises world GDP by 4.2% of likely GDP in 2040 (or 8.3% of GDP in 2019).
- The benefits of the BRI are widespread. As many as 56 different countries are forecast to have their annual GDP in 2040 boosted by more than $10 billion as a result of the project.
- Other than China, which by 2040 will be by far the world’s largest economy and which will therefore benefit from any boost to the world economy, the biggest single potential beneficiary of the BRI is (surprisingly) likely to be the US, even though it isn’t participating directly in the project. This is because of the sheer size of the US economy which means that it gains from the indirect effects of world GDP being boosted. Even though the boost to US GDP is only 1.4% (much smaller than most other major economies) the absolute size of the US economy is still such that this is more than the absolute boost to any other economy except China.
- The next largest impact is in Russia, followed by Japan, Indonesia, Korea, UK, India and the Netherlands (see table).
- The region of the world that will most be transformed by the BRI is likely to be Central Asia and Russia where we predict that GDP in 2040 will be 18% higher. GDP is also likely to be boosted in Central Europe (6%) Western Europe (5%) and East Asia (5%).
- The largest proportional impacts are in Mongolia, Pakistan, the Kirgiz Republic and Russia.
- Through the Belt and Road Initiative China will be continuing to drive world economic growth but in a different way than in the past. In the 10 years since the financial crisis in the West, China (now 15% of the world economy) has driven world demand by accounting for 40% of world GDP growth. Looking forward China will be driving world GDP growth helping the building of infrastructure throughout the world and through reducing both transport and other frictions that hold back world trade.
- The study also considers the impact that might emerge if the BRI is delayed for any reason such as a world economic slowdown or because of technical difficulties. If the spend is halved for example, world GDP (compared with the $2 trillion spend base case) will be reduced by $0.9 trillion or 0.5%. The region most affected will be Central Asia where GDP would be reduced by 5.9%.
A key conclusion of the report is that as the BRI develops, it is likely to attract in further countries. Indeed it is highly likely that Western Europe, which has largely stayed aloof so far, will join in as the project develops momentum. It is even possible, though clearly unlikely under the current administration, that the US will also get involved in the BRI. But this is a longer term aspiration.
Chris Soffe, President of the Chartered Institute of Building, Global Sponsors of the report said: “This report is a fascinating look at plans to build what is effectively a road halfway round the world, with impact way beyond its boundaries. The Belt and Road initiative is the most significant global infrastructure initiative ever seen. Looking at the potential outcomes for the global economy and the opportunities for our industry – and the future of our industry – is something we should all be interested in.”
Cebr Deputy Chairman Douglas McWilliams said: “This is a transformative economic project that will reshape the world’s geography by linking places that were previously unconnected. It will give a huge boost to the global economy not only through creating new infrastructure but more importantly by boosting trade.”
The World Economic League Table (WELT) is an annual calculation by Cebr. The evaluation of the effects of the Belt and Road Initiative uses the Cebr’s WELT model with the 2019 WELT as a base. The base data for 2018 is taken from the IMF World Economic Outlook and the GDP forecast draws on Cebr’s Global Prospects model to forecast growth, inflation and exchange rates.
Please refer to this in copy when quoting as The World Economic League Table.
Cebr is a leading independent commercial economics consultancy based in London. The report has been produced by the Cebr team of economists led by Cebr’s Deputy Chairman, Douglas McWilliams.
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