Shifting FocusYuwa Hedrick-Wong |
The attention of the world is fixed on Europe. After Athens’s turn, it’s Rome’s.
But is the world’s attention fixed on the right place? Would it be better employed farther east, much farther east, and south, in the developing and emerging world?
In the post-crisis global economy, the dynamics of consumer markets are undergoing a profound transformation that is both quantitative and qualitative. The quantitative aspect is a result of the diverging growth rates between the developed and the emerging markets in their economies and consumer markets, resulting what has been referred to as the “two-speed” global economy.
The qualitative side, however, is far more important because of the role of consumption in value creation. In the coming years, choices by consumers in emerging markets will begin to dominate in determining how value is being created in the consumer markets. It is not just the difference in overall growth that matters, but the rising share in the growth of discretionary consumption in emerging markets that will be decisive.
As described in a new MasterCard white paper, Consumer Spending Outlook and Value Creation in the New Global Economy, developed markets’ share of total household consumption in the global economy will drop from 77.4% in 2008 to 58.3% in 2016. The share of the emerging markets will increase from 19.5% to 38.7% over the same period. The share of transitional markets will remain basically unchanged. It is this difference in the incremental increase in consumer demand that will firmly put the emerging markets in the driver’s seat.
For this to happen, however, consumers globally, not just in developed markets, need access to consumer credit and payments media. Mobile connectivity is a powerful enabler in the empowerment of the consumer.
Emerging markets, then, are leading both in consumption and in technology innovations; hence they are driving value creation.
Topics: Economic Outlook