Market Wrap | 24.02.14

July 2013: Population - the Next Generation   A key driver of GDP growth is population growth, particularly the growth in the working population. Population growth can lead to an increase in the size of the workforce population as well as result in increased consumption within an economy. The United Nations recently released its 2012 World Population Prospects, in which it details projected global population trends. This month, we take a look at global long-term population growth and, in particular, at where growth is expected to take place. In its report, the United Nations states that the populations of developed countries is expected to register only minor changes, and would be reversing without the effects of net migration†. Conversely, developing countries are projected to register significant gains in net population.

Source: UN, June 2013 * Then part of Soviet Union (Russian Socialist Federative Soviet Republic)   As can be seen from the graph above, population growth will continue in developing countries, including some of the ‘Next 11’ group of countries earmarked as being poised for significant economic growth prospects in the coming years.   What is interesting to note is the rate of growth in certain countries. India, one of the ‘Growth Markets’, is predicted to overtake China as the world's most populous country by 2050, as the effects of China's one-child policy begin to show and the nation's population stabilises. Brazil, another emerging market country, will see its population increase more slowly than in the last 50 years as more people there enter the middle classes and the economy matures. Indonesia, another emerging economy, will keep its spot in the top 5 most populous countries. Perhaps most significant, Africa begins to make its mark. Nigeria, another ‘N-11’ country, is predicted to have a population boom, overtaking even the United States by 2050. Ethiopia also inches up by 2050, the first time the country makes the list of most populous countries, unseating Russia and Japan. Looking ahead, the ‘developed’ world, with the exception of the United States, does not enter into the top 10 most populated countries. This is despite a projected increase in the world population from 7.2 billion today to 9.6 billion in 2050.   As the graph demonstrates, within the next generation a population shift that is already underway will change the focus of the world from ‘developed’ to ‘developing’ economies as consumer demand and spending rises fast in these countries. Demand in most developed countries, however, will either remain constant or, as is projected for Europe, begin to slow. The shift in population growth and the subsequent potential for economic growth presents investment opportunities for investors as we look ahead to the next generation of global economies. † In its report, the United Nations states that the populations of developed countries is expected to register only minor changes, and would be reversing without the effects of net migration.   Indices:   The Australian All Ordinaries Index has moved up increasing by +1.5% since closing last Friday to 11:50 am today.  The rest of the world as measured by the MSCI index increased +6.3% in A$ from closing last Friday to end of trade Thursday. We hope you had a great weekend, The Team at IPS