Middle class growth in emerging markets

A changing world

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Although inequalities remain, over the last few decades the rapid growth of emerging nations like China and India has brought millions out of poverty.

However, we are only beginning to see the effects of middle class expansion. Regardless of how the forecasts play out, it’s clear that by 2030 there will have been radical shifts in wealth distribution and the economic and political balance of power.

But what are the shorter term implications? A key question for economists is whether or not EM consumers’ new-found spending power is enough to rescue the global economy.

Our research suggests that, although EM consumption will not produce a return to pre-2008 global growth rates, it may be enough to prevent a return to global recession in the next few years (providing consumption in developed markets does not decline).

World consumption spending

World consumption spending

Source: EIU, IEMS’ estimates

There is no doubt, however, that the emergence of a new middle class, with spending power to match developed nations, will offer tremendous business opportunities.

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. As these graphics show, 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.