Will cities contribute more than 60% GDP growth from now until 2025?

We know that urban areas around the world, developed and emerging, are responsible for more than half of current gross domestic product.

According to recent research, however, the pace of growth for the 600 largest cities across the globe will significantly outpace that of the rest of the planet. This week’s latest update from McKinsey & Company suggests that these cities and metropolitan areas will be home to approximately 64% of the world’s GDP growth between now and 2025.

From McKinsey & Company, Chart Focus Newsletter, February 2013

Even more important, the share of GDP growth tied to emerging cities (47%) is more than double those of developed cities (17%).

Naturally, these forecasts have significant implications with regard to public policy and public finance. Not only will growth in emerging cities pose challenges for all levels of involved governments, but the distribution of growth and its impact on higher-level government revenues will likely create greater challenges with respect to its utilization and distribution across state, regional and national populations.

At the same time, according to McKinsey & Company’s own research, there doesn’t seem to be a tremendous amount of focus with respect to businesses on how to integrate core urban growth into their own strategies.

Yet few business leaders focus on the importance of cities when establishing growth priorities. In a recent survey, we found that fewer than one in five executives makes location decisions at the city (rather than country) level. Few executives expected this approach to change over the next five years, and more than 60 percent regarded cities as “an irrelevant unit ofstrategic planning.”1 As these new urban-growth zones flourish, there’s a cost to companies that lack a clear view of the emerging landscape—chiefly in the potential for resource misallocation.

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