Global Research
- Demographics
- Emerging markets
- General Research Insights

Demographics

By James Pomeroy, Global Economist and Herald van der Linde, Head of Equity Strategy, Asia Pacific

10 June 2024

Article

Article

A key driver of everything

Demographics are evolving at the fastest pace in history…
…adding fuel to the structural changes that are reshaping the global economy…
…with big implications for potential growth and policymaking

Fuel for change

Demographics can be a divisive topic. For some, it’s one of the most important drivers of the global economy, whilst for others it’s too long term or irrelevant for their space. We agree with the first perspective and in this report show reasons why demographics’ impact on the global economy is more current and more important than many people think.

Yes, demographics data may be relatively slow moving compared to other macro indicators, but we’re living through the fastest pace of demographic change in history, with birth rates falling at a record pace, ageing of populations happening quickly and key demographic ratios moving just as speedily.

And beyond that, the importance of demographics affects far more than we might think. Which scenario we go down in terms of population sizes is as important, if not more, than any other single factor in determining potential growth rates – crucial for thinking about long-term interest rates and valuations.

For example, no factor is more important in determining future debt dynamics, with rapid ageing meaning worrying debt figures for governments that only look set to get materially worse in the years to come. Decisions over retirement ages, pensions and health spending are going to be crucial for fiscal policy – putting demographics at the front and centre for those decisions.

Demographic change also accelerates many of the other structural changes in the global economy. In Gamechangers: Why the world will never be the same again, 3 April 2024, we posited that the enormous structural, innovation and geopolitical shifts underway will intensify in the coming years. While not necessarily the trigger for many of these thematic changes, demographics are a potent fuel on that fire, likely to push the global economy to change in a myriad of ways more quickly.

This ranges from technology adoption – which should happen more quickly due to intense cohort effects playing out in the global economy. We can add to that more people shopping online, using digital payments or potentially buying an electric (or autonomous) vehicle. A generation raised on the worries of climate change are likely to be key in accelerating the energy transition, with governments across the world pushed into policy choices to win votes from a growing cohort of the environmentally focused electorate.

Demographics will also be a key driver in the tilt where growth comes from. The still-decent population growth in most of the emerging world is in sharp contrast with shrinking populations in many more developed economies. With rising incomes and more middle-class consumers, global demand will shift further towards the emerging world, potentially impacting trade flows, too, with more intra-EM trade looking likely.

And so we all need to understand the global demographics story – with the fast changes in the shape and size of the world’s population set to have huge implications across the length and breadth of the global economy in the coming years.

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Disclosure appendix

The following analyst(s), who is(are) primarily responsible for this document, certifies(y) that the opinion(s), views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: James Pomeroy and Herald van der Linde, CFA

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Global Research
- Demographics
- Emerging markets
- General Research Insights