By Ashish Singh
Karen Harris & Dunigan O'Keeffe
Macroeconomic shocks will be a fact of life over the coming decade, with discontinuities that will shape the options companies have to adapt and grow.
Yet, behind the dire headlines and marketplace frictions, a handful of macro trends are at work, according to our study of macro trends to 2020. Cumulatively, these macro trends will add up to $27 trillion in global GDP growth, which will swell to $90 trillion by 2020, 40% larger than today. The macro trends' growth potential will touch many corners of the globe.
Rising wealth in emerging economies will continue to bring a broader range of goods to huge numbers of new consumers. And while the current turmoil gives business leaders and investors many reasons to stay hunkered down, renewed economic vitality in advanced economies over the next decade will require refurbishing and expanding critical infrastructure. This will present increasing opportunities for public-private partnerships.
As economic power tilts toward Asia, political and military power will shift also, China's military outlays grew 6.7% in 2010 to reach $160 billion. Growing demand among more nations for oil and natural gas, grains, fresh water and extracted ores will create price volatility and transient shortages over the next decade.
The population shift from farm to factory has altered the social landscape in emerging economies, but infrastructure has lagged. Ageing populations in the advanced economies, better medical treatments and changes in payment systems to make healthcare spending more efficient will spur innovation.
Innovation will increasingly come in new forms beyond novel technologies like iPads and Twitter; businesses will invest more heavily in 'soft innovations', which will offer affluent customers premium products and services. And five potential platform technologies, nanotechnology, genomics, artificial intelligence, robotics and ubiquitous connectivity, show promise of flowering over the coming decade.
Each of the eight macro trends will increase global GDP by at least $1 trillion, but just two account for half the expected growth. Today, many management teams are focused on adapting to volatile markets, unstable currencies, high interest rates and worrying inflation in countries like India, as well as political gridlock and stalled growth in the big developed economies.
But some companies will start to pull away from the pack as the larger trends come into focus. As businesses position themselves to profit from these macro trends, they need to be mindful of some important implications:
THE NEXT BILLION CONSUMERS ARE NOT 'ANOTHER BILLION'
They will remain different than consumers in advanced markets, with median yearly household incomes remaining well under $20,000 throughout this decade. This holds true for India, which will provide a large portion of the next billion consumers. India's top economic adviser Kaushik Basu has forecast per-capita income could touch $10,000 a year by 2039, but only if the economy grows at over 8% for the next 25 years.
Karen Harris & Dunigan O'Keeffe
Macroeconomic shocks will be a fact of life over the coming decade, with discontinuities that will shape the options companies have to adapt and grow.
Yet, behind the dire headlines and marketplace frictions, a handful of macro trends are at work, according to our study of macro trends to 2020. Cumulatively, these macro trends will add up to $27 trillion in global GDP growth, which will swell to $90 trillion by 2020, 40% larger than today. The macro trends' growth potential will touch many corners of the globe.
Rising wealth in emerging economies will continue to bring a broader range of goods to huge numbers of new consumers. And while the current turmoil gives business leaders and investors many reasons to stay hunkered down, renewed economic vitality in advanced economies over the next decade will require refurbishing and expanding critical infrastructure. This will present increasing opportunities for public-private partnerships.
As economic power tilts toward Asia, political and military power will shift also, China's military outlays grew 6.7% in 2010 to reach $160 billion. Growing demand among more nations for oil and natural gas, grains, fresh water and extracted ores will create price volatility and transient shortages over the next decade.
The population shift from farm to factory has altered the social landscape in emerging economies, but infrastructure has lagged. Ageing populations in the advanced economies, better medical treatments and changes in payment systems to make healthcare spending more efficient will spur innovation.
Innovation will increasingly come in new forms beyond novel technologies like iPads and Twitter; businesses will invest more heavily in 'soft innovations', which will offer affluent customers premium products and services. And five potential platform technologies, nanotechnology, genomics, artificial intelligence, robotics and ubiquitous connectivity, show promise of flowering over the coming decade.
Each of the eight macro trends will increase global GDP by at least $1 trillion, but just two account for half the expected growth. Today, many management teams are focused on adapting to volatile markets, unstable currencies, high interest rates and worrying inflation in countries like India, as well as political gridlock and stalled growth in the big developed economies.
But some companies will start to pull away from the pack as the larger trends come into focus. As businesses position themselves to profit from these macro trends, they need to be mindful of some important implications:
THE NEXT BILLION CONSUMERS ARE NOT 'ANOTHER BILLION'
They will remain different than consumers in advanced markets, with median yearly household incomes remaining well under $20,000 throughout this decade. This holds true for India, which will provide a large portion of the next billion consumers. India's top economic adviser Kaushik Basu has forecast per-capita income could touch $10,000 a year by 2039, but only if the economy grows at over 8% for the next 25 years.
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