Megatrends Economics
John199
SGRFMegatresds.pptx©SGRF-Economic Research Department
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Six Megatrends Shaping the World
SGRF Economic Research
April 2017
Rising Population and Aging
Rapid Urbanization
Rising middle-class
Sustainability
Diffusion of power
Technological advance
©SGRF-Economic Research Department
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Megatrends
Megatrends are global, sustained and macro economic forces of development that impact business, economy, society, cultures and personal lives thereby defining our future world.
We identify six main megatrends;
Demographic changes (Rising population and ageing)
Rapid urbanization
Rising middle-class
Diffusion of power
Sustainability (claimant change and resources scarcity)
Technological advancement
©SGRF-Economic Research Department
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Why should SGRF adopt these megatrends as part of its investment decisions?
Megatrends would help SGRF identify investment opportunities that are likely to be most profitable over the longer term, therefore enabling successful investments into growing markets.
©SGRF-Economic Research Department
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The current world population is 7.4 billion, by 2050 the population will be over 9.7 billion and by 2100 it could reach a massive 11 billion people.
Demographic Changes
Rising Population
©SGRF-Economic Research Department
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And with the highest rate of population growth, Africa is expected to account for more than half of the world’s population growth over the next 35 years
Source: United Nations
7
9.7
In 2015
by 2050
to
During the 2015-2050 period, half of the world’s population growth is expected to be concentrated in 9 countries: India, Nigeria, Pakistan, DRC, Ethiopia, Tanzania, the US, Indonesia and Uganda.
Tokyo
World’s Most Populated city
37.8people
15,347
births
6,418
deaths
Every hour there are:
9.7b2050
Africa
Is the fastest growing continent
2.5%anualy
500m
1500
With the highest rate of population growth, Africa is expected to account for more than half of the world’s population growth over the next 35 years
Chronological World Population Growth
صندوق الاحتياطي العام للدولة
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Growing demand for food, water, energy, infrastructure and goods and services.
Demographic Changes
Rising Ageing Population
©SGRF-Economic Research Department
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% of the population with 60 years or over
2050
2015
In 2015, one of every 8 people was aged 60 year or older, this figure will rise to one of every 5 by 2050, making up 1.4 billion from 901 million people in 2015, with old people outnumbering children aged 0-9 years.
Growing ageing population will have social, political and economic implications, by increasing the fiscal burden on governments for extra spending on pensions and health care while providing opportunities for businesses.
Source: United Nations
صندوق الاحتياطي العام للدولة
State General Reserve Fund
% of the population with 60 years or over
2000 Japan Italy Korea Spain Portugal Greece Singapore Poland Germany Austria 23.3 24.1 11.2 21.4 21.7 22.8 10.7 16.8 23.1 20.399999999999999 2015 Japan Italy Korea Spain Portugal Greece Singapore Poland Germany Austria 33.1 28.6 18.5 24.4 27.1 27 17.899999999999999 22.7 27.6 24.2 2030 Japan Italy Korea Spain Portugal Greece Singapore Poland Germany Austria 37.299999999999997 36.6 31.4 33.5 34.700000000000003 33.200000000000003 30.7 28.6 36.1 32.4 2050 Japan Italy Korea Spain Portugal Greece Singapore Poland Germany Austria 42.5 40.4 41.5 41.4 41.2 40.799999999999997 40.4 39.299999999999997 39.299999999999997 37.1
Rapid Urbanization
The economic power of cities
©SGRF-Economic Research Department
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Source: United Nations, McKinsey
صندوق الاحتياطي العام للدولة
State General Reserve Fund
According to the United Nations, almost 180,000 people move into cities everyday
66%
Of the world population is projected to be urban by 2050, up from 54% in 2016
1
Tokyo 37.1m
2
Delhi 30.7m
3
Shanghai 36m
4
Mumbai 27.8m
5
Sau Paulo 23.4m
Top 5 Cities by population by 2030
Top 5 Cities by GDP by 2025
1
New York
2
Tokyo
Shanghai
5
4
London
Beijing
By 2030 India will have
68 cities of more than 1m
13 with more than 4m
6 mega cities with
more than 10m
Of Africa’s population will be urban by 2050
1bn
China
590 m
India
Urban population 2030 forecast
By 2030 China will have..
221
Cities with 1m or more
23
Cities with 5m or more
380m
People will be added to the global population from China’s cities – more than the enter population of the US today
56%
Middle-Income
Rising in middle income class continues
©SGRF-Economic Research Department
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Source: United Nations, statista, McKinsey
3,492m
733m
689
212
1,380m
724m
620
285
114
Asia Pacific
Europe
America
192
Middle East & N.Africa
Sub-Saharan Africa
World biggest consumers
صندوق الاحتياطي العام للدولة
State General Reserve Fund
1.8b
4.9b
50m
2015
2030
China
India
150m
850m
1billion
425m
475m
China and India’s contributions to the
global middle class will be substantial
The size of the global middle class will almost triple from 2009 to 2030
2016
2030
of the global middle class will
live in the Asia-Pacific region
in 2030 up from 1/3 in 2009.
The emergence of a wealthy middle class will open up new markets not just in consumer goods, but also for financial services or the health sector, for instance. meaning, there is still plenty of room for businesses to expand in these sectors in the emerging world before parity with the developed world is reached.
Middle-Income
Rising in middle income class continues
©SGRF-Economic Research Department
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صندوق الاحتياطي العام للدولة
State General Reserve Fund
United States
$1.32 trillion
China
$1.3 trillion
United Kingdome
$0.2 trillion
Japan
$0.17 trillion
Germany
$0.09 trillion
$18.7
trillion
$4.3
trillion
$11.25
trillion
$0.55
trillion
Today
2025
Online sales
Non-Online sales
Global retail industry
Global retail industry is forecasted to sharply increase due to the rise of the middle income class
0.1 0.9
Column1
0.15 0.85
Column1
0.24 0.76
Column1
0.18 0.82
Column1
0.26 0.74
Diffusion of power
Rise of those who can play the game
©SGRF-Economic Research Department
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Source: IMF, PWC analysis
1
2
1
2
3
3
4
4
5
5
6
6
7
7
8
8
9
9
10
10
China
China
US
India
India
US
Japan
Indonesia
German
Brazil
Russia
Russia
Brazil
Mexico
Indonesia
Japan
UK
German
Franca
UK
2016
2050
E7
G7
Emerging markets will dominate the world’s top 10 economies (GDP at PPP)
Vietnam, the Philippines and Nigeria could make the greatest move up the GDP by PPP ranking by 2050
Vietnam
Philippines
Nigeria
Up 12 places
Up 9 places
Up 8 places
32nd
20th
28th
19th
22nd
14th
2016
2050
The US and Europe will steady lose ground to China and India
Share of world GDP (PPP) from 2016 to 2050
China
18%
US
16%
EU27
15%
India
7%
20%
12%
9%
15%
2016
EM will continue to be the growth engine of the global economy. By 2050, the E7 economies would rise their share of world GDP from 35% to almost 50%, with China being the largest economy in the world, accounting for around 20% of world GDP.
Although, advanced economies will continue to have higher average incomes, but EM will make good progress as well, which will open up great opportunities for long-term investments in these markets. However, governments need to implement structural reforms to improve macroeconomic stability, diversify their economies away from natural resources, and develop political and legal institutions.
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Projected change in share of world GDP (PPP) from 2016 to 2050
2016
2050
صندوق الاحتياطي العام للدولة
State General Reserve Fund
Advanced countries
Emerging countries
The rest of the world
2050
10
Diffusion of power
Rise of those who can play the game
©SGRF-Economic Research Department
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Source: IMF
صندوق الاحتياطي العام للدولة
State General Reserve Fund
$400
bn
$1,563.5
bn
$875.9
bn
$526
bn
$681.7
bn
$526
bn
$579
bn
$1,445.4
bn
$364
bn
Next game changer
The trillion dollar economies
Note: the figures are GDP at current prices from IMF 2022 forecasts.
Egypt
Mexico
Nigeria
Philippines
South Africa
Thailand
Turkey
Vietnam
Poland
Next emerging economies game changers aside of BRICSs
High GDP growth, improved FDIs and rapid industrialization to give rise to new lot of emerging countries, beyond BRICS that contend to become next economic leaders
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©SGRF-Economic Research Department
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As the world becomes more populous, urbanized and prosperous, demand for energy, food and water will rise. But the Earth has a finite amount of natural resources that can be used to satisfy this demand.
Sustainability
Claimant change and resource scarcity
©SGRF-Economic Research Department
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Source: National Ocean Service, World Meteorological Organization, NASA GISS Surface Temperature Analysis
صندوق الاحتياطي العام للدولة
State General Reserve Fund
“we can state with 99% confidence that current temperatures represent a real warming trends.
--Dr. James Hansen
Director of NASA Goddard Institute for Space Studies
Sea level continues to rise at a rate of about one-eighth of an inch per year. The two major causes are thermal expansion caused by warming of the ocean and increased melting of land-based ice.
Globally, 2015 was the hottest year on record, 2016 overturn it and 2017 is expected to be the hottest according to the World Meteorological Organization
Climate change is already changing seasons and weather patterns, and more extreme weather events such as el-nino, posing substantial risks for agriculture, water supplies, food, ecosystems, energy security, and infrastructure.
Global Warming is happening
This is due to:
81%
Of global energy comes from fossil foil
Vehicles produce about 2.3 kilograms of carbon dioxide for every liter of gasoline they burn, and about 2.7 kilograms of carbon dioxide for every liter of diesel they consume.
Sustainability
Resources scarcity
©SGRF-Economic Research Department
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Source: National Intelligence Council, PWC
50%
more energy
40%
more water
35%
more food
With climate change and rising population, by 2030, we will need…
صندوق الاحتياطي العام للدولة
State General Reserve Fund
Technological Advance
©SGRF-Economic Research Department
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Source: PWC 19th Annual Global CEO Survey
The Top megatrends, which CEO believes will transform their business over the next five years, based on PWC survey
صندوق الاحتياطي العام للدولة
State General Reserve Fund
Increased comfort with technology
Competition advantage using technology
Multiplier effect of technology
Globalization effect of technology
Cheaper access to technology
This changes will come in a form of…
Urbanization Sastanability diffusion of power demographics technological advances 0.36 0.43 0.57999999999999996 0.61 0.77 Series 2 Urbanization Sastanability diffusion of power demographics technological advances 0.64 0.56999999999999995 0.42 0.39 0.23
Technological Advance
©SGRF-Economic Research Department
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Source: McKinsey, PWC, Forbes, HBR
صندوق الاحتياطي العام للدولة
State General Reserve Fund
Software that are capable of performing tasks that normally require human intelligence, such as visual perception, decision-making, and language translation.
Information or visuals to the physical world, via a graphics and/or audio overlay, to improve the user experience for a task or a product.
Distributed electronic ledger that uses software algorithms to record and confirm transactions with reliability and anonymity.
Helps reshape finance, healthcare, government and manufacturing
Air or water-based devices and vehicles, that fly or move without an on-board human pilot.
Devices, vehicles, etc. that are embedded with sensors, software, network connectivity, and compute capability, that can collect and exchange data over the Internet.
Expected to accede $7b this year, from $2.2b in 2014.
Manufacturing techniques used to create three-dimensional objects based on digital models by layering or “printing” successive layers of materials
Printing
Virtual reality
Robots
Internet of Things
Drones
Blockchain
Augmented reality
Artificial intelligence
Change business model and Enable smarter business operation.
Electro-mechanical machines that automate, augment or assist human activities.
Computer-generated simulation of a three-dimensional image or a complete environment, within a defined and contained space, that viewers can interact with in realistic ways.
Will impact businesses over the next 5 years
85%
Of customer interactions will be handled without human by 2020.
Analyst expect AR revenue to reach $48.7B by 2021
Drones Market=$7 billion
By 2020, while provide competitive advantage
Will replace of business operations by 2030.
©SGRF-Economic Research Department
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Now the question is;
What is the potential positive or negative impact these megatrends have on SGRF strategy, and what we should do (or not) with this knowledge.
