Metropolitan cities in emerging markets lead global recovery

The global economic recovery is being led by large metropolitan cities accounting for about half of the global gross domestic product (GDP), said a report.

However, the impact of the recession and the pace of recovery varied widely among global metros, with a shift in growth towards lower-income metros in Asia, Latin America, and the Middle East, said a recent study by the Brookings Metropolitan Policy Program and London School of Economics and Political Science (LSE).

“The rise of China, India, Brazil, and other nations is fundamentally about the rise of their metropolitan areas,” said Alan Berube, senior fellow and research director at the Metropolitan Policy Program and co-author of the report.

Most of the metros in these regions posted annual growth rates of at least 2.5 percent in employment, and 5 percent in income, during the first year of worldwide recovery.

“Many in Asia and Latin America were scarcely affected by the recession at all, or have posted a full recovery.” the report said.

The report titled ‘The Global MetroMonitor’ ranked 150 international metropolitan areas located in 53 countries based on the growth in employment and economic output per person before, during, and after the global downturn. Overall, these 150 metros accounted fro 46 percent of the global GDP in 2007, occupying only 12 percent of the world’s population.

The global economy which posted an annual growth rate of 3.2 percent from 1993 to 2007 had shrunk by 2 percent during the crisis from 2008 to 2009, according to the International Monetary Fund.

Due to negative impact of global economic downturn, nearly seven in eight metros lost either employment or income in at least one year between 2007–2008 and 2009–2010.

But, Istanbul occupied the first position in the 30 top-ranked metros that posted a strong recovery during the most recent year from 2009 to 2010. Shenzhen, Lima and Singapore at second, third and fourth places respectively.

Shenzhen in China is one the top performers before, during, and after the global downturn, as the metro saw potential increase employment and income levels. The region has become an attractive location for manufacturing in China, not only for former Hong Kong-based industries but also for many Taiwanese and Japanese electronics companies. Manufacturing and energy output now accounts for roughly 58 percent of Shenzhen’s economy.

Australian metros such as Melbourne, Brisbane, and Sydney also posted strong performance due to their economic linkages with stable East Asian economies, the report said.

However, metros in the US and Europe are still struggling to regain their footing while those in Asian and Latin American have fully recovered from the global crisis, the report said.

The report found 29 of the top 30 performing metros during the most recent year from 2009 to 2010, were located outside the US and Europe. Besides, 28 metros in Europe or the United States found a place among 30 metros with the weakest performance in the recovery.

“Overall, the Great Recession appeared to hit U.S. metros hardest, while it improved the relative position of metros outside the United States and Europe,” the report said.

Austin is the only city in the US that appears in the top 30 list. Its income grew somewhat faster than the national average during the recovery. The employment growth in the city returned to pre-crisis levels. As a sign of the area’s continued strength, Facebook made its first major U.S. expansion outside California in Austin in 2010.

A few metros in the US that witnessed severe decline in economic growth during the recession such as Detroit and Cleveland rebounded strongly, while Atlanta and Las Vegas still lag behind.

The report ranks Detroit at 46th place, New York at 77th and Los Angeles at 116th.

“Several in the United States and other high-income regions have rebounded to their prior employment or income level, but not yet both,” the report said.

The report said the metros in the US, Western Europe, and high-income regions with huge construction activity recorded much better than average in the pre-recession period, but their performance was much worse than average in the recovery.

Metros like Dubai, Riga, and Las Vegas with significant construction activity performed well pre-recession, but saw their rankings plummet as asset bubbles popped, said the report.

Zurich is ranked at 101th position, Munich at 109th position, London at 123th and Berlin at 111th position.

“The world is no longer the same place, and that the rise of metro leadership calls for new thinking,” said Judith Rodin, president of the Rockefeller Foundation.