Over the next two decades, the engines of economic growth will not be the emerging markets, according to Clint R. Laurent. In his new book, Tomorrow’s World: A Look at the Demographics and Socio-Economic Structure of the World in 2032, Laurent argues that the source of economic growth will instead come from mature, developed nations.
Since 1996, Laurent, founder and managing director of Global Demographics Ltd., has provided a “forward-thinking” demographic and socio-economic blueprint of tomorrow. Today, Global Demographics captures data on 75 countries, representing 83% of the world’s population and 94% of global GDP. Using proprietary econometric models, Laurent and his colleagues have developed a forecasting niche that projects nations’ demographic profiles out 5, 10, and 20 years.
In addition to his assertion that China’s economic growth “has to slow” to a projected 5.1% average annual rate over the next decade, Laurent’s insights include a positive outlook for Japan and a not-so-positive outlook for India, which was once touted as the heir apparent to its neighbor China. Education, according to Laurent, is the single most important variable in assessing a nation’s future growth potential. With 5 million Indian children between the ages of 6 and 11 not in classrooms every year, education is the missing ingredient in India’s recipe for expanding workforce productivity.
China will reach a tipping point over the next two decades as its population ages and its workforce declines, both casualties of the country’s one-child policy. Nevertheless, Laurent claims that removal of the policy would not meaningfully reverse the trend. The silver lining for China, however, is that the empty-nester sector (ages 40–64) of the population is expanding. By 2032, China will be “the place to go to sell rather than to buy.” Currently, with consumer spending at 35% of GDP, China has a long way to go to reach the global average consumption-to-GDP ratio of 55%, and Laurent believes it is on its way.
The power inherent in demographic data is in understanding how the trends, which Laurent characterizes as stable and steady, will affect the major variables of a nation’s economic growth, such as consumer demand and workforce productivity. From today’s vantage point, Laurent is very optimistic that the rising incomes and increasing demand associated with an expanding population of empty nesters will provide the economic steam necessary for a revitalization of global economic growth.
Clint Laurent will share his most current observations at the upcoming 67th CFA Institute Annual Conference to be held in Seattle, Washington, on 4–7 May 2014. You can register to attend the event and follow this blog for more news and updates.
The content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.