Megatrends: Shift in global economic power

Economy

Shift in global economic power

By 2030, we estimate that the E7’s purchasing power will overtake that of the G7. As incomes rise in these markets, they will contribute an increasing share of the global middle class. By 2015, we estimate that Asia Pacific will have a larger middle class than Europe and North America combined.

 

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The way we classify economies today is becoming less relevant

While the distinction between the E7 and G7 remains important, so are the divergences which are opening up within them. For example, Italy’s economy is the same size as it was in 2000 in real terms, whilst Canada’s has expanded by over 30%. China’s economy has tripled in size whilst Mexico’s has “only” grown by a third. But emerging markets still face challenges if they want to escape the middle income trap and catch up with advanced markets.

Shift in global economic power

View the infographic here

A new view of the global economy

What will the global economic landscape look like in a decade’s time? Put simply, we need a new view of the global economy:

  • some emerging markets will move up the value chain and challenge high-end consumer durable production by today’s developed markets. In doing so, they will increasingly becoming the core markets for global businesses;
  • today’s frontier markets (F7) will be tomorrow’s emerging markets. They will increasingly become the growth markets of global businesses;
  • a growing pool of high-skilled talent will fuel this emergence process. Increasingly, global multinationals will be led by people from the emerging markets and as a result, business culture will become more diverse; and
  • developed countries will be able to benefit from reshoring as wage gaps close and they maintain their superiority in providing services such as education and health care.

Which markets hold the greatest growth potential?

To prepare for this new landscape, today’s business leaders need to take a closer view at which markets hold the greatest growth potential.  In our recent global CEO survey we found that CEOs are already doing this. Saudi Arabia and Malaysia are among the top markets cited as important for their growth prospects in the next three to five years and this is also backed up by the results of our new ESCAPE index.