Hong Kong and Singapore ranked first and third respectively in Ernst & Young’s Globalisation Index 2011 released today.

The third annual Ernst & Young globalisation report draws on two sources of original research: Ernst & Young’s Globalization Index, which measures the world’s 60 largest economies according to their degree of globalisation relative to their GDP, and a survey of 1,000 senior business executives worldwide, conducted in late 2011, canvassing their thoughts on globalisation; as well as a forecast of global and regional GDP growth over the next four years.

The report says that, despite faltering prospects for the world economy, globalisation is still increasing among a majority of the world’s 60 leading economies as they so far avoid descent into protectionism. However, 90% of business executives surveyed by Ernst & Young expect to see an increase in protectionist measures if the global economy slides into a double-dip recession.

While Ernst & Young forecasts that global GDP growth will be just 3.4% in 2012, the index continues to predict that globalisation will continue to advance this year and up to 2015. This is most pronounced for medium-sized emerging markets like Vietnam, Malaysia, Mexico and Colombia and smaller European countries like Belgium, Denmark, Slovakia and Austria.

“While globalisation continues apace regardless of weaker growth around the world, it is important to take into consideration that most of this growth comes from Asia: this year 14 of the world’s 60 largest economies according to their degree of globalisation relative to their GDP come from Asia, compared to 12 the year before,” says Lou Pagnutti, Area Managing Partner, Asia-Pacific of Ernst & Young.

Source of Economic Growth

Business executives surveyed were understandably nervous about the current business outlook. The performance of the emerging markets, led by the BRIC countries, continues to offset sluggish growth in the developed world. Ernst & Young forecasts that the combined GDP of the emerging markets is set to grow by 5.3% in 2012, while Emerging Asia is set to grow by 6% in 2012.

“With Emerging Asia continuing to outpace the developed world and increase its share of world GDP, rising economic and trade links will see a continued flow of Foreign Direct Investment (FDI) from Asia. The GDP of emerging markets (measured on a purchasing power parity basis) could overtake that of the developed economies as early as 2014, with about 70% of total world growth in the next few years coming from the emerging markets, of which over a half will be from China and India.” says Pagnutti.

“Ranked first and third respectively, it is no doubt that Hong Kong and Singapore are leading the way with innovation and diversity.” Pagnutti explains, “The ability to adapt and react with flexibility, responsiveness and unconventional thinking put them in the leading positions.”