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Reality check

Last year saw a record jump in optimism regarding global growth prospects in 2018, and this exuberance translated across regions. This year, by contrast, saw a record jump in pessimism, with nearly 30% of CEOs projecting a decline in global economic growth, up from a mere 5% last year. CEOs also reported a noteworthy dip in confidence in their own organisations’ revenue prospects over the short (12-month) and medium (three-year) term. If CEOs’ confidence continues to be a leading indicator, global economic growth will slow down in 2019.

2019

22nd Annual global CEO survey

PWC

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Aging populations are forcing developed regions worldwide to rely more on waning productivity and greater migration to propel growth

Labor productivity growth has waned and is near historic lows in the United States and much of Western Europe, despite a job-rich recovery after the global financial crisis. Productivity growth averaged just 0.5 percent in 2010–14, down from 2.4 percent a decade earlier. This productivity growth weakness comes as birth rates in countries from Germany, Japan, and South Korea to China and Russia are far below replacement rates and working-age population growth has either slowed or gone into reverse. In some countries with declining populations, such as Japan and Germany, some cities are shrinking. Among their other effects, these demographic trends put a greater onus on productivity growth to propel GDP growth; over the past 50 years, just under half of GDP growth in G-20 countries came from labor force growth, while productivity growth accounted for the remainder. Digitization, often involving a transformation of operating and business models, promises significant productivityboosting opportunities in the future, but the benefits have not yet materialized at scale in productivity data because of adoption barriers and lag effects as well as transition costs. Our research suggests that productivity could grow by at least 2 percent annually over the next 10 years, with 60 percent coming from digital opportunities. However, while crisis-related aftereffects are diminishing, long-term drags on demand for goods and services may persist and hold back productivity, a result of changing demographics, declining labor share of income, rising income inequality, polarization of labor markets, and falling investment rates. In terms of consumption, the aging population in many developed countries (that is, the retired and elderly over 60) are increasingly important drivers of global consumption. The number of people in this age group will grow by more than one-third, from 164 million today to 222 million in 2030. We estimate that they will generate 51 percent of urban consumption growth in developed countries, or $4.4 trillion, in the period to 2030. That is 19 percent of global consumption growth. The 75-plus age group’s urban consumption is projected to grow at a compound annual rate of 4.5 percent between 2015 and 2030. In addition to increasing in number, individuals in this group are consuming more, on average, than younger consumers, mostly because of rising public and private healthcare expenditure. Retirees and the elderly in developed economies today have per capita consumption of around $39,000 per year. In comparison, the 30-to-44 age group consumes on average $29,500 per year. Healthcare spending by those aged 60 and older is projected to grow by $1.4 trillion in the period to 2030. With low fertility in the developed world, migration has become the primary driver of population and labor force growth in key developed regions worldwide. Since 2000, growth in the total number of migrants in developed countries has averaged 3.0 percent annually, far outstripping the 0.6 percent annual population growth in these nations. First-generation immigrants constitute 13 percent of the population in Western Europe, 15 percent of the population in North America, and 48 percent in the Gulf Cooperation Council countries. Besides contributing to output today, immigrants provide a needed demographic boost to the current and future labor force in destination countries. Improving the old-age dependency ratio is of critical importance to countries like Germany, Spain, Canada, and the United Kingdom, where most public pensions have a pay-as-you-go structure and worsening dependency ratios threaten to make many plans unsustainable.

2019

Navigating a world of disruption

McKinsey

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Sustainable land-use

Known technical solution areas which require innovation to realise their potential and enable scale of deployment: Land-use transparency, Low-emissions agriculture, New-techniques in forest management, Reduced losses in the supply chain, Soil sequestration, Low-emissions sources of protein, Reduced emissions from livestock, Reduced deforestation.

2017